J.D. Power: Wholesale Values Decline in May
J.D. Power Valuation Services’ seasonally adjusted used-vehicle price index managed to increase for the first time in a year. While positive, May’s index figure was 7.6% below May 2016.
MCCLEAN, Va. — The month of May ended slightly better than the way the month has historically performed over the last 20 years, with wholesale prices for vehicles up to eight years in age falling 1.9%, according to J.D. Power’s Guidelines monthly report.
Despite the glimmer of positivity after February’s abnormally weak performance, the firm found that the 31-day period underperformed J.D. Power’s expectations for the month.
“In lieu of a mitigated February federal tax season bounce back, J.D. Power Valuation Services’ seasonally adjusted used-vehicle price index managed to increase for the first time in a year and grew 0.8% to 111.1,” the firm noted in its report. “While positive, May’s index figure was 7.6% below May 2016.”
At the segment level, mainstream segment losses were led by the usual suspect, mid-size cars. Wholesale prices for that segment fell by 2.6%. “Prices were weak for all mid-size models, but especially for the Nissan Altima, which experience declines around 4%,” the firm noted. “Additionally, late model-year Altima volume accounted for 20% of all mid-size car volume over the past few months, which has helped keep prices for the group depressed.”
Like their sedan counterparts, mid-size van values also softened. Prices for the segment fell 2%. Most of this was due to a 70% increase in 2017 model-year volume, which was traced back to an elevated number of Kia Sedona units returning to the marketplace, according to J.D. Power’s report.
“While at the opposite end of the spectrum, mid-size pickups continue to perform exceptionally well, despite a 37% year-to-date increase in late-model volume,” the firm stated. “On the luxury side of the market, luxury mid-size car prices tumbled by 2.6% following a strong April showing.”
Additionally, luxury large utility prices fell 2.1%, which was the segment’s worst May since 2012. The firm attributed the decline to a sharp 8% increase in month-over-month auction volume.
Conversely, luxury compact car prices remained strong and increased by a slight 0.1%. So far, according to the firm, year-to-date volume of luxury compact cars is down 10% compared to a year ago, ultimately aiding in strong prices for the group.
Looking at auction trends, auction sales volume of models up to eight years old fell 3% from the prior four-week period to 366,212 units. Volume for this age group of vehicles reached a lesser 360,394 units in May 2016.
Late-model vehicle volume, or units up to three years old, was essentially unchanged from April at 210,426 units. Late-model volume now sits at 1.24 million units through the first five months of this year, which is 7% greater than the 1.16 million units in the year-ago period.
At the segment level, late-model compact car volume was up 6% month over month, while large pickup and mid-size car volumes grew 2% and 1%, respectively. Subcompact car volume fell by 3%, while mid-size pickup and mid-size van volume decline 4% and 10% respectively.
For June, wholesale prices of vehicles up to eight years in age are expected to decline by approximately 1.9%, which would be slightly better than what occurred in June 2016.
At the segment level, mainstream losses are expected to be fairly consistent, with the exception of mid-size and large pickups. They continue to perform very strongly and are forecast to perform significantly better than the industry average. Losses for all premium segments are forecast to fall around the industry average.
“In terms of full-year expectations, used prices are expected to decline by around 6% in 2017, which is two points worse than 2016’s 4% loss,” the firm noted in its report. “Ongoing increase in supply, higher incentives, and a normalizing retail environment — including credit conditions — will ultimately dictate losses.”
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