Used-Vehicle Values Set New Record for Third Straight Month
Friday October 5, 2018
- Wholesale used-vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) increased slightly – 0.14 percent – month-over-month in September.
- This brought the Manheim Used Vehicle Value to 139.9, which was a 3.7 percent increase from a year ago and a record high for the Index.
- Wholesale used-vehicle values are forecast to remain relatively strong going forward as supply is on the decline and the mix of vehicles at auction shifts.
ATLANTA, Oct. 5, 2018 – Wholesale used-vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) increased slightly – 0.14 percent – month-over-month in September. This brought the Manheim Used Vehicle Value Index to 139.9, which was a 3.7 percent increase from a year ago and a record high for the Index.
Looking at trends in weekly Manheim Market Report (MMR) prices, the abnormal summer bounce began in mid-June and drove prices higher for 11 straight weeks. September saw several weeks of normalizing depreciation; but even after that normalization, 3-year-old vehicles are now worth 4.5 percent more than they would normally be worth had typical depreciation occurred through July and August.
On a year-over-year basis, all major vehicle segments saw price gains in September; but more affordable vehicles are seeing the greatest increases in values. Compact cars and midsize cars outperformed the overall market, while vans, utility vehicles, and pickups underperformed the overall market.
“The strong wholesale prices we saw in the fall of 2017 were driven mostly by major hurricane activity, causing significant vehicle loss in Texas and Florida,” said Jonathan Smoke, chief economist for Cox Automotive, parent company of Manheim. “This year, the abnormal rise in value seems to be mostly man-made, driven primarily by consumer demand, rising interest rates, and threats of tariffs. Consumers and dealers alike had reason to believe the cost of buying a vehicle would be more expensive later in the year, so there was a strong sense of urgency and ‘buy now’ mentality in both new and used.”
Wholesale used-vehicle values are forecast to remain relatively strong going forward as supply is on the decline and the mix of vehicles at auction shifts. Year-to-date, 51 percent of auction volume has been sedans, mostly compact and mid-size cars, while popular SUVs make up only 31 percent of the volume. SUV volume, however, is growing, while car volume shrinks following the trend in the new-vehicle market. Especially for consumers seeking an affordable solution to higher vehicle prices and interest rates, sedans have been becoming more attractive. However, the supply of sedans in the new-vehicle market is near a six-year low, making them more in demand in the used market. As a result, compact cars and midsize sedans are the best-performing vehicle segments on the Manheim Index in September.
U.S. Vehicle Sales
According to Cox Automotive estimates, used-vehicle sales volume in September was down 2 percent year-over-year. The annualized pace of used-vehicle sales, however, was up almost 1 percent over last year, led by franchised used-vehicle sales (up 1 percent in September on an annualized basis) and private-party used-vehicle sales (up 4 percent in September on an annualized basis). We estimate the September used SAAR to be 39.4 million, down from 39.7 million last September.
September new-vehicle sales fared worse than used vehicles, down 6 percent year-over-year, with one less selling day compared to September 2017. The September SAAR came in at 17.4 million, down versus last year’s 18.1 million.
Cars continue to see sharp declines as sales in September fell 21 percent compared to last year. The market share for cars came in under 30 percent for the second straight month. Light trucks outperformed cars in September and were up 2 percent year-over-year. New-vehicle sales year-to-date are up less than 1 percent versus last year. Cox Automotive has forecast new-car sales to slow in Q4 and finish the year at 16.8 million, down slightly from 2017.
Fleet has been the driver of the strength in the new-vehicle market year-to-date, and fleet purchases increased in September relative to August. Despite the monthly decrease in total new light-vehicle sales, the volume of fleet sales was up 2 percent year-over-year and is up 7 percent year-to-date. New-vehicle sales into the rental channel were up less than 1 percent in September versus last year.
New-vehicle inventories came in under 4 million units for the fifth consecutive month.
Rental Risk Pricing
The average price for rental risk units sold at auction in September was up 6 percent year-over-year. Rental risk prices were flat compared to August. Average mileage for rental risk units in September (at 44,300 miles) was up 5 percent compared to a year ago and up 2 percent month-over-month.
Second-quarter economic growth as measured by GDP was left unchanged at 4.2 percent in the third and final estimate. Personal spending slowed down in August as personal income, disposable income, and spending all grew the same amount at 0.3 percent. The personal savings rate, the net left over after all spending relative to disposable income, remained at 6.6 percent, the lowest level this year. Consumer Confidence, as measured by the Conference Board, increased in September to 138, the highest since September 2000. In the Conference Board data, the percentage of households reporting plans to purchase a vehicle in the next six months improved slightly to 13.4 percent. This is up from last year when plans were at their lowest point for 2017.
To download additional commentary on Cox Automotive’s Manheim Used Vehicle Value Index, visit the Learning Center.
Manheim® is North America’s leading provider of vehicle remarketing services, connecting buyers and sellers to the largest wholesale used-vehicle marketplace and most extensive auction network. Through 127 traditional and mobile auction sites and diverse digital channels, the company helps dealer and commercial clients achieve business results by providing innovative end-to-end inventory solutions. Approximately 18,000 employees enable Manheim to register about 8 million used vehicles per year, facilitate transactions representing nearly $57 billion in value, and generate annual revenues of $3 billion. Headquartered in Atlanta, Manheim North America is a Cox Automotive™ brand. For more information, visit http://press.manheim.com.
About Cox Automotive
Cox Automotive Inc. makes buying, selling, owning, and using cars easier for everyone. The global company’s 34,000-plus team members and family of brands, including Autotrader®, Clutch Technologies, Dealer.com®, Dealertrack®, Kelley Blue Book®, Manheim®, NextGear Capital®, VinSolutions®, vAuto®, and Xtime®, are passionate about helping millions of car shoppers, 40,000 auto dealer clients across five continents, and many others throughout the automotive industry thrive for generations to come. Cox Automotive is a subsidiary of Cox Enterprises Inc., a privately owned, Atlanta-based company with revenues exceeding $20 billion. www.coxautoinc.com