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KBB: Used Supply Shortage Coming to an End?

January 17, 2013

IRVINE, Calif. — In its monthly Blue Book Market Report, Kelley Blue Book said it spotted a 1 percent annual increase in auction sales volume across the country in the fourth quarter 2012. The vehicle information site said the uptick could signal that the used-vehicle shortage that has plagued dealers since 2010 may be coming to an end.

“Although a 1 percent increase is certainly a positive sign, auction volume in the Q4 2012 was still 26 percent lower than in Q4 2007,” the report read. “While analysts don’t expect auction volume to return to levels seen in 2007 and prior anytime in the near future, moving forward they do expect auction volume to remain above level see last year.”

According to KBB, wholesale auctions will likely see an increase of at least 200,000 off-lease units in 2013, and even more in 2014. “With that in mind, auction values likely will continue to decline from current levels.”

Although values dropped modestly in the fourth quarter 2012, used-car values are nearly 5 percent higher today than they were a year ago — even after normalizing for mileage and condition, KBB said.

“The average one- to three-year-old used car currently has an auction value of $16,200 on average; up from $15,500 in January 2012,” stated KBB’s report. “The annual increase in used-vehicle values largely can be attributed to the strength of 2011 model-year redesigns such as the Chevrolet Cruze, Hyundai Elantra and Chrysler 200. These vehicles remain highly desirable and have significantly outperformed the generation they replaced.”

 Although values began 2013 on a high note, the firm believes values will likely struggle to keep pace with the robust increases from last year. In the short term, KBB said it expects values to remain relatively flat in January before increasingly slightly in February and March in anticipation of the spring selling season.

“Through the first quarter of 2013, analysts expect only a moderate increase of 0.5 percent in auction values, well short of the 2.5 percent increase during the first quarter of 2012,” stated KBB.

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