BLACK BOOK – Wholesale Prices, Week Ending October 9th

Wholesale prices continued to gain momentum, with all segments reporting week-over-week increases last week. The lack of new inventory is the top comment we are hearing from dealers as the reason for the strength at the auctions.

                                          This Week    Last Week    2017-2019 Average (Same Week)

Car segments                        +0.65%        +0.64%             -0.52%

Truck & SUV segments       +0.52%        +0.47%             -0.39%

Market                                  +0.57%        +0.53%             -0.44%

Car Segments

  • On a volume-weighted basis, the overall Car segment increased +0.65%. For reference, the previous week, cars increased by +0.64%.
  • All nine car segments reported gains last week. This is the first time this has happened since the week of 6/14/21.
  • Compact Car (+1.11%) and Mid-Size (+0.91%) Car segments had the largest gains. For comparison, these segments increased by +0.95% and +1.04%, respectively, last week.
  • Sporty (+0.24%) and Premium Sporty (+0.28%) Car have had some recent weeks of declining values, but both reported increases this past week.

Truck / SUV Segments

  • The volume-weighted, overall Truck segment increased +0.52%, compared to the previous week’s increase of +0.47%.
  • All thirteen truck segments reported gains last week.
  • Compact Van (+1.24%) is a small segment, but it has seen considerable strength throughout the pandemic. Over the last thirty-four weeks, the segment has averaged a weekly increase of +0.69%.
  • Compact (+0.95%) and Sub-Compact (+0.81%) Crossovers also had large gains, with Sub-Compact increasing significantly from the prior week’s change of +0.47%. Compact Crossovers were consistent with the prior week’s increase of +0.95%.

Weekly Wholesale Index

Calendar year 2020 ended with used wholesale prices at elevated levels. With economic patterns (including the automotive market) driven by the pandemic, normal seasonal patterns (e.g., 2019 calendar year) in the wholesale market were not observed for most of the year. We saw a similar picture in 2009, at the end of the Great Recession. Calendar year 2021 has not had typical seasonality patterns as the market has had rapid increases in wholesale values for the majority of the year. After reaching record heights at the end of June, wholesale prices began to decline at a rate higher than the typical seasonal decline through July and most of August. As we moved into the Fall season, wholesale prices began to show a positive movement once again and reached the highest point of the year last week, at 1.396.

The graph below looks at trends in wholesale prices of 2-6-year-old vehicles, indexed to the first week of the year.

Retail (Used and New) Insights

  • Tesla had their annual shareholders meeting last week. The announcements included the news of the move of their headquarters from California to Texas and the potential risk for the manufacturer due to the microchip shortage and other supply chain delays.
  • The 2022 Geneva Motor Show has been cancelled; this will be the third year that the show will not take place.
  • Buyers in the market for a minivan in 2022 will no longer have the option of the Chrysler Voyager. The minivan is consolidating trims, adding some content, and going fleet-only for the next model year.
  • Mazda is increasing their portfolio of crossovers, globally and within North America. The North American market is going to gain a two-row, CX-70, and a three-row, CX-90 in the next couple of years.

Used Retail Prices

With the proliferation of ‘no-haggle pricing’ for used-vehicle retailing, asking prices accurately measure trends in the retail space. Retail demand slowed down at the end of last year, and thus resulted in declining retail asking prices for the last several weeks of 2020. As demand rebounded, retail prices have lagged slightly behind wholesale prices, but March had an accelerated growth in retail prices. In April and May, retail prices picked up speed as demand accelerated, fueled by stimulus payments, tax season, and shortages of new inventory. In June, retail prices continued to rise at a slower rate. After strong increases during the Spring and early Summer, retail listing prices have increased to around 28% above where we started the year.

This analysis is based on approximately two million vehicles listed for sale on US dealer lots. The graph below looks at 2-6-year-old vehicles.

Inventory

Used Retail

Current used retail listing volume is about 17% below the start of the year. Used inventory is now starting to decrease again due to a slowdown of trade-ins and lease returns.

Days-to-turn for used retail listings have been increasing, as retail demand softened over the last month. The days-to-turn now sits just above 36 days, which is still lower than what is typically expected in a normal year.

Wholesale

Sales rates were stable this past week. The lack of new inventory continues to be the reason we are hearing from buyers, as to why they are currently sourcing from auctions and paying up for used vehicles. Traditionally, this is a time of year when we would expect to see a lull in values and activity at auctions before gaining some traction at the end of the year, in preparation for the next year’s tax season.

The overall wholesale market for 2-8-year-old vehicles increased by +0.57% last week, and 0-2-year-old increased +0.60%, resuming the trend of the newer used units increasing by a larger amount on average.

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