Kontos Sees Off-Lease Influence Grow, NADA Sees Other Reasons for Price Drop September 17, 2014

Solid Retail Used Vehicle Demand Not Enough to Offset Price Drop

Tom Kontos
Executive Vice President & Chief Economist
ADESA Analytical Services

Softening wholesale prices clearly continued into August as off-lease volume grows; prices were down for first since January on year-over-year basis. Retail used vehicle sales is making up for some of it with strong demand especially for certified pre-owned (CPO) units. There has been a temporary lull coming from strong retail new vehicle demand; retail used sales should come back strong in coming months given improving economy and job growth. However, used vehicle prices should continue to decline as supply outpaces demand.

Here’s the latest edition of Kontos Kommentary

Wholesale Prices at $9,592 -- Down 1.6% from July and 0.4% from August 2013:
August prices for compact cars, fullsize vans and mini, midsize and large SUVs were up from July, while all other segments were down.

Manufacturer Sales Saw Weaker Demand for Off-Rental Program Vehicle Inventories:
Prices for off-rental “risk” units within fleet/lease consignor segment were again down significantly.

Retail UV Sales Down 14.8% Month-Over-Month and Down 9.4% Year-Over-Year:
CPO sales were up 11.4% versus July and up 11.1% from the prior year.

NADA Sees August Price Drop Coming from Market Correction and New Vehicle Sales Pressure

Jonathan Banks
Executive Automotive Analyst
NADA Used Car Guide

NADA Used Car Guide sees price drops more in line with two factors -- market correction from inordinate run-up in spring prices combined with pressure from new vehicle market -- than do other analysts who see off-lease and off-rental volume being principal cause of downturn. For second month in a row, prices were down more severely in August than what’s been recorded for the month; wholesale prices of vehicles up to eight years old were down 3.1% from July. That was worst showing for August since 2002.

NADA Used Car Guide Industry Update for September 2014

New Vehicle Sales Rose by 5% and SAAR Jumped to 17.5M Units:
Incentive spending climbed for 5th straight month to nearly $2,975 per unit.

Subcompact and Compact Cars Again Did Poorly -- Falling by 3.6% and 3.3%:
Mid-size cars also down from previous month at 3.4% -- which tied August 2011 as segment’s worst showing in past 5 years.

Large Luxury Cars Dropped 3.7%, Biggest Decline Among All Segments:
Prices of compact and mid-size luxury cars fell within a range of 2.6% to 3%.

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