Manheim Reports Rising Used Vehicle Pricing In Q3

ATLANTA--Oct. 7, 2013: Manheim today reported that wholesale used vehicle prices in the U.S. rose in the third quarter of 2013, reversing course from the previous quarter. Prices increased in each of the three months of the quarter, with August marking the biggest monthly gain since the impact from Hurricane Sandy at the end of 2012. Pricing was up slightly year over year. The findings were part of the company's quarterly Used Vehicle Value Index conference call presentation held earlier today.

Ample availability of consumer financing, low inventories of new vehicle models and higher transaction prices in the new vehicle market were primary drivers of the strong wholesale pricing for used cars. This contrasts with the second quarter of 2013 in which used vehicle wholesale prices fell on both a linked-quarter and year-over-year basis.

"The strengthening new vehicle market boosted demand for used vehicles as consumers searched for affordable and available options for cars," said Tom Webb, chief economist. "An important determinant of late-model used vehicle pricing is the amount of new vehicle inventory sitting on dealership lots, and with new vehicle sales averaging an annual rate of nearly 16.0 million during the third quarter, dealers found themselves with lower inventory levels overall and shortages for some key models. That led to higher new vehicle transaction prices and strong wholesale used vehicle values. This can be seen clearly in the pricing for used midsize cars which improved significantly during the quarter and actually outperformed the overall market."

Pricing in the third quarter for wholesale vehicle segments include:

Midsize car pricing rose significantly in the third quarter, after having been constrained in the first half of 2013 by the competitive offerings and price discounting in the new vehicle market. New vehicle pricing among midsize cars in the third quarter increased due to inventory shortages and reduced incentive offerings, which drove up the seasonally adjusted wholesale prices for late-model midsize cars. On a year-over-year basis, pricing in this segment was up 4.9 percent. Pickup truck pricing remained high during the quarter and demonstrated the strongest year-over-year growth at 7.4 percent. However, despite a continued shortage of late-model, low-mileage units, there was a softening in overall sales from previous quarters, resulting from increased supplies that have begun to work their way into the wholesale market. Luxury cars performed weaker in the third quarter compared to a year ago, with pricing declining by 1.4 percent. As more consumers bought and leased new luxury cars, especially 2014 models that came onto the market, more trade-ins became available, increasing the supply of late-model used vehicles.

Wholesale values are likely to moderate in coming months due to increased supply in both new and used vehicle inventories. Much of the used vehicle supply will come from higher off-lease returns, which will boost the availability of late-model used vehicles.

"Leasing activity has been strong in 2013, both in traditional and nontraditional brands and segments," said Webb. "We expect leasing to become an even higher percentage of new vehicle sales moving forward. As a result, returns of late-model used vehicles should increase over the next several years, especially in 2016 when today's lease originations become due, serving to moderate used vehicle prices and widen the spread between dealer costs for new and used vehicles. This should be a positive for dealers and consumers as long as current leasing activity does not become laden with incentives, which could serve to drop residual values and disappoint consumers who financed rather than leased their vehicle."