Pricing is strong for nearly-new midsize used cars entering the wholesale market, but older model prices are anemic, according to the latest industry data.
The Manheim Used Vehicle Value Index listed no change in February’s wholesale used-vehicle prices. The Index remained at 113.3, identical to January but 1.9% lower than the previous February.
The report shows average auction transaction prices jumped $500 the past six months, a 5% imcrease. Adjustments for a richer mix, seasonal factors and lower mileage of units sold kept the rise to 1% since last August.
Manheim’s chief economist Tom Webb says it’s important to remember dealers do business “in real dollars – not mix, mileage, or seasonally-adjusted ones.”
“As a result, further increases in wholesale prices will likely be kept in check by the cap imposed by competing new vehicles and the budget constraints of potential retail used vehicle buyers,” he says.
Webb says newer-model used-vehicles and commercial-fleet prices remained strong last month.
“Prices for nearly-new used vehicles sold at auction in February were boosted by the continuing reduction in new-vehicle inventories, fewer widespread new-vehicle incentives and a reduction in program vehicles coming out of the rental fleet,” he says. “Midsize cars coming out of commercial fleets continued to command top dollar at auction (last month).”
Prices were weak for “older, rougher cars.”
Consumer confidence last month reached its highest level in more than five years. However, there is reason to question how long the momentum will last, Webb says, citing instability in the housing industry.
“On the positive side, the gross domestic product report, as well as February’s Purchasing Managers’ Index, suggest that, economy-wide, the manufacturing sector will see some relief now that excess inventories have been worked off,” he says.