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Used-Vehicle Pricing in Volatile Wholesale Market


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In today’s volatile wholesale market, dealers need more information and tools for assessing used-vehicle values to sustain and drive profitability. Increasing gas prices are driving many customers away from new-car purchases and structurally changing the vehicle pricing mix. The result is a more complex trade-in environment. 

Auction transaction data from August bears out this point. AuctionNet® data shows wholesale prices of large pickup trucks down 14.5 percent year-to-date, despite rising 7.7 percent in August over the June low point. Similarly, large SUV values have fallen 11.3 percent this year, despite rising 8.9 percent in August over June. By contrast, compact car values have climbed 22 percent year-to-date, and continued to grow at a more moderate 2.1 percent pace in August over June’s rate.

NADA Used Car Guide’s revised estimates show that for every $1 increase in gas prices, large pickups decline in value by $2,700, on average.  On the other hand, for intermediate compact cars, a $1 increase in fuel costs lifts resale prices by an estimated $1,000.

For dealers, projecting inventory requirements and assessing used-vehicle pricing trends in this environment present new challenges that call for a close look at the market data. To help dealers better define pricing for a broader spectrum of vehicles and access true auction prices quickly and conveniently, NADA Used Car Guide has introduced new and enhanced products.
 
All-New Value Categories for Electronic and Print Products 
New "Rough Trade-In" and "Average Trade-In" values are now included in all NADA Used Car Guide electronic products, and will be part of the printed guidebook in October. These new values complement the existing “Clean Trade-In,” "Clean Loan," and "Clean Retail" values and provide a more complete picture for dealers of pricing based on vehicle condition. 

In practice, the majority of vehicles - about 50 percent - fall into the "Average" condition category, according to NADA market data. Vehicles in the "Clean" category represent 15 percent of the market, while those in the "Rough" category - usually considerably damaged, but not "Salvage" vehicles - are about 20 percent of the total. The remaining vehicles fall into the "Extra Clean" or "Salvage" unit category. 

As illustrated below, NADA’s “Clean” Trade-In values often carry a premium over the AuctionNet® average price.  The new “Average” Trade-In value will be closer to the AuctionNet average price, while “Rough” Trade-In will often be lower than the AuctionNet average price. 


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In addition, by adding in actual auction data as a reference point, dealers can also get a good reading of how the wholesale market is reacting at any point in time.
 
Real Auction Sales Data with AuctionNet Market Report and SmartBid 
Two newly launched NADA Used Car Guide products - AuctionNet Market Report and SmartBid - provide actual, timely auction data in online and portable formats. These products help dealers monitor the volatility of the market and make smart purchasing and selling decisions. They provide access to real auction sales data from AuctionNet, including transactions from all Manheim and ADESA auctions, as well as participating ServNet, ABC, and independent events. That’s about 80 percent of all transactions going through auctions.   

AuctionNet Market Report, produced in partnership with the National Auto Auction Association, gives dealers 24/7 online access to the most recent eight weeks of auction transactions. It offers a comprehensive summary report, with searchable access to approximately 1.2 million records. The report includes price and mileage ranges and specific, true auction transactions by sale week. 

SmartBid provides the convenience of portability by delivering AuctionNet data right to a dealer’s Palm, with a variety of search tools allowing decoding by VIN or searching by make/model, and sorting by price, mileage, sales type, or date.      

These products help dealers know the dynamics of the auction market better - the low points and the high points. That can make the difference between profit or loss when it comes to buying a car for resale.    
 
Eye to the Future
NADA’s editors believe that as long as gas prices remain volatile and above the $3.40 level, the price of gas will heavily influence the used-car market for the next 12 to 18 months. Only when the new threshold of acceptable gas prices is established, and the model mix of new cars and the used supplyreflect the current demand framework, will the used market return to the fundamentals that have historically driven resale prices. In the meantime, dealers need to continue to closely monitor the market using the best information and tools available to them to stay on top of the latest developments.

To learn more about all of NADA Used Car Guide’s vehicle value categories, as well as its full lineup of electronic and print products and services, visit www.nada.com/b2b.