Q-1 2014 used vehicle market recap
Winter storms hit much of the country in January and February, negatively impacting used vehicle sales at both a wholesale and a retail level. Industry sources report various results; some showing price increases while others reflected decreases, depending on the data being adjusted or unadjusted along with the comparison period. January 2014 year over year results were similar from most sources indicating prices declined approximately 1% from January 2013 for wholesale auction returns on used vehicle sales.
Data from Manheim’s Tom Webb indicated that average seasonally adjusted auction prices rose in January, compared to December returns, at a modest 0.5%. ADESA’s Tom Kontos, reporting unadjusted average sale price, indicated January saw a 3.4% increase in auction prices over December. Kontos reports that manufacturer vehicles sold at auction were down in January but both the fleet/lease and dealer segments had increased returns month over month. Credit union repossession vehicles are typically included in the fleet/lease segment.
CNW indicated that in 2013 used vehicle sales were just under 42 million units with 37% of volume from franchise dealers, 35% from independent dealers, and 28% from private parties. The number of used units sold was more than 2.5 times the volume of new vehicles sold in 2013, indicating a continued strong demand from consumers for used vehicles. CNW did report that used vehicle retail sales were down significantly in January citing adverse weather as the primary factor.
Prices by vehicle segment also showed significant differences in January with the compact and luxury segments down more than 3% while trucks and SUV’s were up more than 4%. Overall, NADA reported that used vehicle sale prices in January were basically unchanged with a total increase of 0.1% in sale prices.
Historically, February is the beginning of a two to three month period of increasing prices for used vehicles as consumers receive tax refunds. ‘Tax Season’ is often the strongest time of year for used vehicle sales and experts are generally in agreement by predicting prices are likely to decline later in the year. Increased supply is expected to continue through 2014 putting downward pressure on both wholesale and retail sales.
For credit unions, the current market for used vehicles is near a historical high and prices are likely to remain strong through the first quarter. However, once tax season is over, market conditions may not be as favorable and returns are not expected to be as strong compared to the current environment.
