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June 2018 Kontos Kommentary

Current Used Vehicle Market Conditions and Outlook


Summary

Average wholesale used vehicle prices registered their fourth consecutive year-over-year price decline in June and also fell on a monthly basis at a greater-than-seasonal clip. The wholesale market has reached a steadier state in terms of “mix” than existed a year ago or two years ago, when an influx of younger, off-lease vehicles and a shift towards truck model classes inflated average prices. As a result, current average price trends are more indicative of actual price softening than at this time last year. Parity is also being reached between sales price trends for cars and trucks, with both now generally softening at similar rates. Nevertheless, prices remain strong for off-lease vehicles, as supply growth in that sector is being neutralized by upstream sales.


Details

According to ADESA Analytical Services’ monthly analysis of Wholesale Used Vehicle Prices by Vehicle Model Class, wholesale used vehicle prices in June averaged $10,895 – down 2.0% compared to May and down 1.4% relative to June 2017. Average prices were down on a year-over-year basis for both cars and trucks, with month-over-month declines for most of the model class segments in both groups. Pickup trucks and sporty cars, rarer at auction, were the only classes that showed monthly upticks.

When holding constant for sale type, model-year age, mileage, and model class segment, prices were up on a year-over-year basis for both midsize cars and midsize SUV/CUVs, as seen in the following table:

 

This proxy for off-lease units is showing strong price gains on a year-over-year basis, with midsize cars beginning to outperform midsize SUVs and crossovers, as the incoming supply of trucks is now outpacing that of cars. The strength of these prices indicates that upstream sales are preventing an oversupply of off-lease units from reaching physical auction lots.

Average wholesale prices for used vehicles remarketed by manufacturers were down 2.8% month-over-month but up 3.9% year-over-year. Prices for fleet/lease consignors were down 1.0% sequentially but up 7.0% annually. Average prices for dealer consignors were down 1.2% versus May and down 4.9% relative to June 2017.

June CPO sales were down 3.2% from the prior month but up 8.7% year-over-year, according to figures from Autodata. On a year-to-date basis, CPO sales are up 3.3% versus last year.

 

1 The analysis is based on over six million annual sales transactions from over 150 of the largest U.S. wholesale auto auctions, including those of ADESA as well as other auction companies. ADESA Analytical Services segregates these transactions to study trends by vehicle model class.

The views and analysis provided herein relate to the vehicle remarketing industry as a whole and may not relate directly to KAR Auction Services, Inc. The views and analysis are not the views of KAR Auction Services, its management or its subsidiaries; and their accuracy is not warranted. The statements contained in this report and statements that the company may make orally in connection with this report that are not historical facts are forward-looking statements. Words such as “should,” “may,” “will,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “bode”, “promises”, “likely to” and similar expressions identify forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected, expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include those matters disclosed in the company’s Securities and Exchange Commission filings. The company does not undertake any obligation to update any forward-looking statements.

Wholesale Price Data by Model Class Segment - June 2018
Wholesale Price Data by Model Class Segment History 2015-062018
Wholesale Price Data by Model Class Segment - Full History 2011 - 012016
ADESA Analytical Services Selected Model Class Segments
Wholesale Price Data by Model Class Segment - Full History 2000 - June 2012

Kontos Kommentary - June 2018