Black Book Market Insights – 5/3/2022

Wholesale Prices, Week Ending April 30th

The market gained some strength last week, with the overall market increasing for the first time since the week before Christmas last year. Compact Cars once again led the increases this past week, and conversion rates continued to improve as buyers brace for what they expect will be a continuation of supply struggles.

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

Car segments                     +0.38%         +0.23%              -0.05%

Truck & SUV segments    -0.02%          -0.14%               +0.04%

Market                                +0.11%        -0.03%               +0.00%

Car Segments

• On a volume-weighted basis, the overall Car segment increased +0.38%. For reference, the previous week, cars increased by +0.23%.

• Seven of the nine Car segments increased last week.

• Compact Cars had another week of large gains, appreciating an additional +0.91% after the prior week’s large increase of +0.92%. 8-to-16-year-old Compact Cars increased +1.16%.

• Luxury Car (-0.37%) and Premium Sporty Car (-0.22%) were the only Car segments to report declines.

• Sub-Compact Cars continued to increase with a gain of +0.41%, but the strength of the newer model years (0-to-2 years) was much larger at +1.17%.

Truck / SUV Segments

• The volume-weighted, overall Truck segment decreased -0.02%, compared to the prior week’s decrease of -0.14%.

• Seven out of the thirteen Truck segments reported increases.

• Compact Crossovers (+0.41%) increased for a fifth consecutive week for an average weekly gain of +0.32%.

• After twelve weeks of declines, the Minivan segment returned to gains last week, with an increase of +0.18%. Compact (+0.55%) and Full-Size (+0.32%) Vans continued their increases, marking sixty-six weeks of gains for the Full-Size segment.

• Small Pickups (-0.72%) had the largest decline of the Truck segments last week.

Weekly Wholesale Index

Calendar year 2020 and 2021 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 last 2 years. We saw a similar picture in 2009, at the end of the Great Recession. Calendar year 2021 did not have typical seasonality patterns as the market had rapid increases in wholesale values for the majority of the year. The Wholesale Weekly Price Index reached the highest point of the year at the end of December, reporting over 1.51 points. Now, in calendar year 2022, the index has been reverted back to the 1.00 mark and overall wholesale prices remained relatively stable after February’s declines.

The graph below looks at trends in wholesale prices of 2-6-year-old vehicles, indexed to the first week of the year. The index is computed keeping the average age of the mix constant to identify market movements.

Retail (Used and New) Insights

• Porsche is introducing a limited-production version of the “ducktail” 911 with a seven-speed manual transmission powering the rear wheels.

• Toyota Motor Corp. is adding a new six-speed manual transmission to the GR Supra coupe for the 2023 model year.

• The North American International Auto Show is scheduled to return this September for the first time in more than three and a half years.

• Dodge announced plans to introduce their first plug-in hybrid, a compact crossover called the Hornet, this summer.

• Ford Motor Co. started regular manufacturing of its F-150 Lightning EV pickup last week; Ford aims to build 150,000 Lightning trucks a year.

• Subaru revealed trim and pricing details of its first mass-market EV, the Solterra crossover, just ahead of its arrival in dealerships.

• Ram plans to roll out a concept version of an electric full-size pickup truck this fall, with production slated for 2024.

• Aston Martin is going electric, launching their first EV in 2025; every model will be available with an electrified powertrain by 2026, starting with a Valhalla plug-in hybrid in 2024.

Used Retail Prices

Used Retail Prices are more accessible than in years past, due to the proliferation of ‘no-haggle pricing’ for used-vehicle retailing. Transparent pricing upfront makes the car buying process more enjoyable for customers and allows Black Book to accurately measure retail market trends.

At the on-set of the pandemic, in CY2020, used retail prices increased slightly, following typical seasonal patterns, and then began dropping in April, finally hitting a low point in the late spring months. By late summer of CY2020, Used Retail Prices increased as supply of new vehicle inventory started to become scarce, but retail demand slowed down at the end of CY2020, resulting in declining retail asking prices for the last several weeks of the year. When CY2021 kicked off, demand rebounded while retail prices lagged slightly behind wholesale prices; March of 2021 started the dramatic increases in Used Retail Prices, fueled by stimulus payments, tax season, and shortages of new inventory. During the third quarter, retail prices continued to rise at a slower rate but soon picked up the pace once again to start the fourth quarter. In Q4, prices on retail listings steadily increased week after week. As CY2021 came to an end, the retail listing price index closed 36% above where the year began.

So far in 2022, the Retail Listings Price Index has remained relatively unchanged (green curve on the graph below), The Index sits around 0.99, indicating a very slight decrease in retail pricing. Typically, there is a lag between changes in wholesale prices and retail prices.

This analysis is based on approximately two million vehicles listed for sale on U.S. dealer lots. The graph below looks at 2-6-year-old vehicles. The Index is computed keeping the average age of the mix constant to identify market movements.

Inventory

Used Retail

Used Retail Listing Volume increased slightly this week, staying in close proximity to the CY20 trend line, and now sits close to 1.00.

The Used Retail Days-to-Turn Estimate has continued to drop over the last few weeks and remains below 36 days.

Wholesale

Newer used vehicles continue to be popular in lane, especially those with lower miles or in cleaner condition. Model year 2022 vehicles are beginning to trickle in but often they are damaged, repossessed, or buybacks. Canadian imports are still popping up here and there but nowhere near the volume seen in prior months. Rental companies and large independents are still attending sales but have been less aggressive over the last few weeks, allowing franchise and smaller independent dealers opportunities to purchase vehicles. Many sellers are holding floor prices in anticipation of higher values. Wholesale values did increase overall this week, with smaller vehicles on the passenger car and light truck side being the most coveted. Fuel prices are on the rise again after a slight drop at the beginning of April and dealers are planning accordingly.

The Estimated Average Weekly Sales Rate continues to increase and now is at 71%.