Current Used Vehicle Market Conditions and Outlook

Summary

Average wholesale used vehicle prices in April remained near peak levels achieved in the Spring/tax season last year and in 2010. As we’ve discussed in several past commentaries (and as other analysts and data sources have begun to reinforce) used vehicle prices have probably seen their cyclical and seasonal peak and, absent events like last year’s tsunami, have more downside potential than upside. Still, tight supplies are likely to keep used vehicle prices from falling dramatically the rest of this year and well into 2013.

Details

According to ADESA Analytical Services’ monthly analysis of Wholesale Used Vehicle Prices by Vehicle Model Class¹, wholesale used vehicle prices in April averaged $10,577 – down 0.5% compared to March and flat relative to April 2011. Among model class segments with considerable volume, compact cars, minvans, and smaller SUVs tended to yield stronger prices, perhaps reflecting ongoing selectivity among dealers in favor of more fuel efficient cars and trucks with which to stock their used car lots.

Manufacturers registered a 1.2% month-over-month price increase and a 4.0% year-over-year rise. Fleet/lease consignors experienced a 1.4% sequential price increase and a 1.9% annual increase. Dealer consignors saw a 0.5% average price increase versus March and a 0.9% uptick versus April 2011.

Based on data from CNW Marketing/Research, retail used vehicle sales in April were flat year-over-year for franchised dealers and down 8.0% for independent dealers, possibly reflecting pushback from used vehicle shoppers facing high prices and in some cases opting for new vehicles as a result. Perhaps a reflection of this trend was that April sales of certified used vehicles, which are typically the closest substitutes for new vehicles, were down 18% month-over-month and 8% year-over-year based on data from Autodata. Nevertheless, total retail used vehicle sales were up by over 40% on a month-over-month basis, reflecting typical Spring weather and tax season demand.