Wholesale Prices, Week Ending June 5th

Wholesale values have continued to rise for 19-consecutive weeks, although that rate of gains slowed for some segments and about 9% of vehicles had a downward change in wholesale prices. With that said, the market remains strong following the holiday weekend and we expect next week will be a good indicator of whether the market is softening, riding a plateau, or returning to the climb.

Car Segments

• On a volume-weighted basis, the overall Car segment continued its 19-week trend, increasing this week by 0.8%. For reference, the previous weeks increase was 0.9%.

• All nine car segments reported gains last week, however, 0.8% is the lowest weekly gain the overall car segment has seen in 15-weeks.

• The Compact car segment had the largest weekly gain at 1.25%, marking 12-consecutive weeks of gains greater than the overall car segment average.

Truck Segments

• On a volume-weighted basis, the overall Truck segment also continued a 19-week trend, increasing 1.02% this past week. For reference, the previous weeks increase was 0.9%.

• Twelve of the thirteen segments reported gains last week, with six gaining 1% or higher.

• Last week, one segment declined in value – Sub-compact Luxury Crossover declined by –0.16%.

• The Compact Crossover/SUV segment took the lead this week, increasing 1.59%, that’s 19-consecutive weeks of gains.

Newer Used Vehicles (0-2-year-old)

Driven by an extreme shortage of rental returns and limited inventory of new vehicles, the price of newer used vehicles has been experiencing large weekly gains. With wholesale prices exceeding MSRP in some cases, the rate of increase slowed down in the last several weeks.

The table below shows the average weekly price changes for 0-2-year-old vehicles.

Weekly Wholesale Index

2020 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 year. We saw a similar picture in 2009, at the end of the Great Recession. It is now clear that 2021 will also not have typical seasonality patterns as the market is going through a rapid increase in wholesale values. The spring market arrived about 7 weeks earlier and with much stronger price increases compared to a typical pre-COVID year. The graph below looks at trends in wholesale prices of 2-6-year old vehicles, indexed to the first week of the year. Currently, wholesale prices are around 33% higher compared to the beginning of the year (adjusted for the mix).

Black Book’s May Wholesale Retention Index

The May Retention Index showed another increase and broke yet another record, reaching 159.6 points, a 7.1 point (or 4.7%) increase from April (152.4). The Index currently stands 50.6% above where it was the same time last year, during lowest point in automotive values due to COVID-19. Wholesale prices continued their ascent each week in May, although the rate of increase declined throughout the month. Demand for used and new vehicles remained strong even with dwindling new inventory. Available used inventory stabilized in May and started to build up at the end of the month, although we are still about 10% below where we started the year. This strong demand and  low inventory together with low (and declining) incentives levels on new vehicles helped the retention index to increase for the fifth month in the row to a new record. This month, all segments besides Full-Size Vans showed increases, with Minivans having the largest gains again (almost 13%).

Retail (Used and New) Insights

• BMW revealed details of their all-electric iX xDrive50 crossover, i4 eDrive 40 sedan, and an i4 M50 variant; they should arrive in Q1 2022.

• Toyota has unveiled its 2022 Corolla Cross, an all-new subcompact sport-utility; Toyota also debuted their All-Electric SUV Concept, bZ4X.

• Production of Tesla’s Model S Plaid+ has been cancelled; it would have been Tesla’s longest-range car with a driving range of 520 miles.

• Ford’s new Ford Maverick Hybrid Compact Pickup will debut this week and is expected to share a platform with the Bronco Sport crossover.

• Nissan has pushed back the start of sales for their EV crossover Ariya, which will now be available in the U.S. starting in 2022.

• GM said it expects a “significantly better” first half of 2021 than previously thought; they also hope to increase vehicle deliveries in the U.S.

Used Retail Prices

With the proliferation of ‘no-haggle pricing’ for used-vehicle retailing, asking prices accurately measure trends in the retail space. Retail demand slowed down at the end of last year, and thus resulted in declining retail asking prices over the last several weeks of 2020. As demand rebounded, retail prices have lagged slightly behind wholesale prices, but March had an accelerated growth in retail prices. In April and May, retail prices picked up speed as demand accelerated, fueled by stimulus payments, tax season, and shortages of new inventory. Currently, the prices are more than 20% above where we started the year.

This analysis is based on approximately two million vehicles listed for sale on US dealer lots. The graph below looks at 2-6-year-old vehicles.

Volume

Used Retail

Current used retail listing volume is about 13% below the start of the year and while inventory levels have been slowly but consistently increasing over the last 6 weeks, they seem to be evening out as we head into the summer months.

Days-to-turn has continued to decrease since the middle of March, which reflects the limited supply and strong demand across the country.

Wholesale

Although floor pricing remains strong and the availability of average and clean vehicles remains scarce, conversion rates have been slightly increasing over the last few weeks.

• Despite the limited inventory on dealer lots, dealer lanes continue to have higher volume at auction, while manufacturers’ remarketing lanes are dwindling down. Many dealers are finding higher profit margins in the wholesale channel as opposed to their own retail lots.

• OEM remarketers are able to continue naming their price in the lanes for vehicles as a result of an extremely limited inventory pipeline. Even if a vehicle does not sell this week, it is expected to sell in the near future as there are limited opportunities for dealers to procure inventory.