Kontos: Modest Price Increase Masked Actual Condition, Banks: New Vehicle Demand and Off-Rental Softened Prices October 15, 2014

Wholesale Prices Continued Decline for Fifth Straight Month

Tom Kontos
Executive Vice President & Chief Economist
ADESA Analytical Services

Wholesale used vehicle prices declined for fifth straight month in September. Year-over-year, prices saw a modest increase that may have masked the actual market conditions. There was a higher percentage of institutional sales of late-model vehicles compared to last year. Stronger used retail sales cushioned some of the blow to wholesale prices.

Here’s the September edition of Kontos Kommentary

Wholesale Used Vehicle Prices by Model Class Averaged $9,557:
That was 0.4% down from August, but up 0.8% over September 2013.

Average Prices For Minivans Were Up Significantly in September:
Reflects increase in current and one-year-old models sold in factory sales.

Used Truck Prices Rose Significantly on M-O-M and Y-O-Y Basis:
Cars went in opposite direction with major monthly and annual price declines.

Third Quarter Saw Weakest Used Vehicle Price Results Since 2002

Jonathan Banks
Executive Automotive Analyst
NADA Used Car Guide

Wholesale prices of vehicles up to eight years old fell 3.6% in September from August, well above the 2.8% decline for that period over the past two years. Elevated rate of depreciation over past three months caused weakest third quarter for used prices seen since 2002. September’s NADA price index was at 121.4, similar to first half of 2013.

NADA Guidelines edition for October 2014

Downward Pressure from New Vehicle Market Brought Softness to Used Prices:
Increasing volume of off-rental units also responsible for decline during third quarter.

Incentives Likely Have Also Played a Role in Diverting Interest in Used Cars:
Incentives jumped 18% in Q3 over prior year – level not seen since mid-2005 (excluding 2009’s recession-induced spike).

Subcompact, Compact and Mid-size Cars Again Saw Most Severe Price Drop:
Prices for these segments fell by 3.6%, 3.9%, and 3.7%, respectively.
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