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Kontos: Tale of Two Markets Resumes in March

While wholesale prices were below year-ago levels for cars, they were up for trucks. The revelation prompts KAR Auction Services' chief economist to revisit a study he began during the industry's first experience with $4 gas back in 2008, when the price gap between trucks and cars closed dramatically.

by Staff
April 24, 2017
2 min to read


CARMEL, Ind. — The tale of two markets resumed in March, with wholesale prices below year-ago levels for cars (down 1.7%) but up 1.3% for trucks, according to KAR Auction Services’ Tom Kontos.

Prices for both groups, however, were up (2.2% for cars and 1.4% for trucks) compared to February’s unseasonably soft results, as retail sales and wholesale activity showed signs of the typical spring/tax season trends, Kontos added.

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“In analyzing the current bifurcated market, it seems timely to revisit a study begun during the first episode of $4 gas in 2008, when truck prices softened dramatically and car prices rose,” Kontos wrote in his Monthly Kontos Kommentary. “At that time, the price gap between full-size SUVs and compact cars had fallen from close to $13,000 in January of 2000, when SUVs were all the rage, to $2,162 in June of 2008, when gas prices hit $4 a gallon. In other words, dealers were paying high prices for small cars and low prices for big SUVs at the time, narrowing the price gap between the two. That turned out to be the all-time low for this price gap, which gradually rose to $8,293 by November 2016 as gas prices have fallen and the popularity of SUVs has recovered.

“Per our March data, this gap has dropped to $6,675, perhaps indicating that SUV prices are moderating and compact car prices are recovering,” Kontos added. “We will monitor this going forward.”

According to ADESA Analytical Services, wholesale used-vehicle prices in March averaged $10,904, up 2% compared to February and up 1% relative to March 2016. All but on model class segment (compact pickups) showed month-over-month increases. Minivans showed the biggest increase year-over-year increase (13.5%), but Kontos said the growth was exaggerated by newer models.

Average wholesale prices for used vehicles remarketed by manufacturers were up 1.1% on a month-over-month basis but down 1.7% year over year. Prices for fleet/lease consignors were up 3.8% sequentially and up 0.8% annually. Average prices for dealer consignors were up 2.7% vs. February and up 1.3% relative to March 2016.

“Breaking the data down by age shows that prices were down 2.5% year over year for current and one-model-year-old units (typically off-rental units) and down 2.6% for three-model-year-old units (a good proxy for off-lease units),” Kontos noted.

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Based on data from the NADA Used Car Guide, retail used-vehicle sales by franchised and independent dealers were up 9.3% month over month and up 1.6% year over year. March certified pre-owned sales were up 15% month over month, although they were down 0.3% year over year from last March’s all-time record levels, according to figures from Autodata.

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