Black Book Market Insights – 1/31/2023

Wholesale Prices, Week Ending January 28th

Early signs of a potential Spring bump in the market are starting to emerge with the Sporty Car segment reporting an increase for the second consecutive week. Additionally, the older, 8-to-16-year-old vehicles are reporting lower depreciation, -0.27%, compared to -0.50% for the 2-to-16-year-olds.

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

Car segments                        -0.50%               -0.69%                    -0.42%

Truck & SUV segments       -0.50%               -0.50%                     -0.37%

Market                                  -0.50%               -0.56%                     -0.39%

Car Segments

• On a volume-weighted basis, the overall Car segment decreased -0.50%. For reference, the previous week, cars decreased by -0.69%.

• Seven of the nine Car segments decreased last week, with only one reporting a decline greater than 1% (Prestige Luxury, -1.77%).

• Sporty Car increased for a second consecutive week, up +0.11% after the prior week’s increase of +0.03%.

• Full-Size Car (+0.06%) increased after thirty-two weeks of declines that averaged -0.76% depreciation per week during that time.

Truck / SUV Segments

• The volume-weighted, overall Truck segment decreased -0.50%, compared with the prior week’s decline of -0.50%.

• All thirteen Truck segments reported declines last week, with only two reporting declines greater than 1% (Sub-Compact Luxury, -1.11%; Mid-Size Luxury, -1.13%).

• Compact Crossover (-0.13%) reported the smallest decline for the segment since last June.

• Full-Size Van had a second consecutive week of larger than average depreciation for the segment. Last week’s depreciation was -0.37%, compared with the prior six weeks that averaged -0.17% decline per week.

Weekly Wholesale Index

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.

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 three 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 most of the year. The Wholesale Weekly Price Index reached the highest point of the year at the end of December 2021, reporting over 1.51 points. In 2022, the price index was on a mild rollercoaster until July, after which point prices were on a continuous decline until the end of the year.

Retail (Used and New) Insights

• The 2024 Polestar 2 is receiving an update to the styling, new-generation permanent magnet electric motor, and updated lithium-ion batteries. Look for the refreshed version to be released in the second half of this year.

• Level 3 autonomous driving capabilities are going to be available on the 2024 Mercedes-Benz EQS and S-Class sedans. The system, called Drive Pilot, initially launched in Germany, but has now been approved for initial use in Nevada for the US market.

• At Tesla’s quarterly earnings call last week, CEO Elon Musk, said that the Tesla Cybertruck won’t be available until next year. In addition to the news on the Cybertruck, the price cuts earlier this month are having the desired outcome with orders for new Tesla’s having increased.

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. The index has remained relatively stagnant through most of CY2022. In the fourth quarter of 2022, the Retail Listings Price Index declines started, but not as steep as the wholesale price index.

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 active listing volume index reverted back to one at the start of 2023. Currently, the index sits at 0.99 points.

The Used Retail Days-to-Turn estimate is around 50 days.

Wholesale

As we come to the end of January, the wholesale lanes have had a somewhat rocky start, with low sales rates and minimal inventory. Sellers recently have started trying to entice buyers, with auctioneers re-running unsold vehicles. Buyers, on the other hand, are very aware of the dropping vehicle values, but it seems they are hopeful for a traditional Spring market. Clean newer model year vehicles have been extremely desirable since new inventory is still not coming in consistently. In addition, older model year vehicles, especially those that are under $20,000, have been popular for non-franchise dealers. There have not been as many closed sales for the franchise buyers, but they also have not been too active in the downstream lanes. Rental companies have not been aggressively purchasing in lane, although they are present occasionally. We are beginning to see signs of some normal seasonality, with the Sporty Car segment continuing to increase in value. The Estimated Average Weekly Sales Rate will be something to watch as we head into February.

The Estimated Average Weekly Sales Rate remained stable at 46% last week.