October Wholesale Prices Reveal Market Softness
ADESA’s chief economist says off-rental program vehicles kept wholesale prices artificially high in October. They also masked softness in a market that is facing high incoming supply.
CARMEL, Ind. —ADESA’s Tom Kontos reported this week that, like September, a large portion of higher priced, late-model, manufacturer off-rental program vehicles — some of which were sold after delays due to recalls — biased average wholesale prices upward in October and masked softness of a wholesale used-vehicle market facing high incoming supply.
According to ADESA Analytical Services, wholesale used-vehicle prices in October averaged $9,678, a 1.3% increase from September and a 0.9% increase from a year ago. And like September, average prices for minivans were up significantly, but Kontos said the uptick reflected an increase in the percentage of current and one-year-old models sold in factory sales.
“Retail used-vehicle demand did not provide quite the support to auction prices it had in previous months, as franchised dealers did well simply to retail the many units they have been taking from off-lease purchases and in trade on strong-new-vehicle sales,” Kontos noted.
The firm’s chief economist noted that prices for used vehicles remarketed by manufacturers were down 11.3% month over month and 8.6% year over year, as manufacturers sold off elevated program vehicle inventories, including recalled units.
Prices for fleet/lease consignors were down 3.7% sequentially and 2.2% annually. Prices for off-rental “risk” units within this segment were again down significantly. “Dealer cosigners were the only seller group that saw average price increases in October, registering a 1.4% increase versus September and a 0.7% increase relative to October 2013,” Kontos wrote in his monthly Kontos Kommentary report. “This bodes well for the wholesale market’s ability to absorb excess dealer trades.”
Retail used-vehicle sales in October, according to CNW Market Research, were down 18% from September and 3.8% from a year ago. However, franchised dealers saw a 2.2% year-over-year increase, indicating they are having success in retailing the many trade-ins they are taking in light of strong new-vehicle sales.
Additionally, according to Autodata, sales of certified pre-owned vehicles were up 7.5% from September and 13.8% from a year ago. “Strong CPO sales have been particularly useful in absorbing high incoming lease volumes,” Kontos noted.
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