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ADESA: Turning Point in Sight for Wholesale Prices

May 13, 2008

Carmel, Ind. Despite another dip in wholesale prices in April, ADESA's chief economist sees potential for improvement in the second half of 2008. Tom Kontos, the auction solutions company's executive vice-president, customer strategies and analytics, noted that April prices declined just 0.2 percent from the previous month and 1.5 percent from April 2007. Furthermore, Kontos identified the certified pre-owned (CPO) and buy-here, pay-here (BHPH) segments as solid performers in what has been a slow spring season.

"Certified pre-owned sales continue to be strong, as shoppers seek to maximize value in their vehicle purchasing decisions," Kontos said. "On the other end of the spectrum, buy-here-pay-here dealers may be enjoying increased traffic at their stores from car shoppers who have been turned away from other financing sources."

Kontos also noted that inventory for both CPO and BHPH sales may be threatened by falling late-model program car volumes and a reduction in dealer consignment of older units to auction. "On the other hand," Kontos noted, "rental risk, off-lease, commercial fleet and repo units are available in good quantities to fill the gap." Even so, the latest numbers offer hope for dealers.

"The diminished rate of reduction in wholesale prices may signal that wholesale prices and used-vehicle sales are nearing the turning point we predicted for the second half of 2008," Kontos said, "The cumulative impact of over six months of decreases in interest rates by the Federal Reserve Board, combined with the issuance of tax rebate checks from the government, promise to improve the retail and wholesale used vehicle sales environments as we approach mid-year."

The full text of Kontos' report can be read here.

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