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Manheim: Wholesale Prices Decline for Third Straight Month

February 08, 2018

ATLANTA — Wholesale used-vehicle prices decreased 0.74% month over month in January. This brought the Manheim Used Vehicle Value Index to 131.0, a 4.9% increase from a year ago but the lowest level since last July.

On a year-over-year basis, all major market segments except midsize cars saw gains. Luxury cars, pickups, and vans outperformed the overall market.

“Depreciation accelerated for most vehicles to catch up with the abnormal pricing performance in September; but now that prices are more in line with the general trend prior to the hurricanes, expect the rate to slow down to normal,” the firm noted in its monthly report. “As we look ahead in 2018, we will likely miss the normal “bounce” in used-vehicle prices in March as tax refunds will again be delayed as part of the IRS effort to combat identity fraud. Prices should be on firmer footing by April, as retail demand kicks into gear.”

On the new-vehicle side, sales volume increased 1% from the year-ago period. There was one more selling day compared to January 2017. The month’s seasonally adjusted annual rate (SAAR) was 17.1 million, the fifth straight month the SAAR was over 17 million.

Cars continued to see sharp declines, with sales falling 11% from a year ago. Sales of light trucks continued to outperform cars, rising 8% from a year ago. Combined rental ( down 11%), commercial, and government (down 5%) purchases of new vehicles were down 3% from a year ago.

New-vehicle inventories remained below four million units for the seventh straight month, the firm noted.

As for used, Cox Automotive estimates that sales declined 2% from a year ago. The January used-vehicle SAAR came in at 39.2 million units.

Looking at the economy, the firm noted that January’s employment report was better than expected, with monthly job creation increasing to 200,000. Unemployment remained at a 17-year low at 4.1%. However, the underemployment rate, the broadest measure of unemployment, ticked up again to 8.2%, indicating that there is some slack left to be worked out, the firm said.

Consumer confidence in January was the second-best reading in more than 17 years. It was also up substantially from a year ago. “Positive wage growth combined with the parade of businesses announcing bonuses and pay increases from tax reform is producing fertile ground for strong and growing consumer spending and auto buying in the spring,” the firm noted.

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The firm had expected a steeper decline due to replacement activity linked to last year’s hurricanes. Instead, Black Book saw fairly typical depreciation.