July 2016 Kontos Kommentary
Current Used Vehicle Market Conditions and Outlook
Average wholesale values fell again seasonally in July, but they remain up on a year-over-year basis largely because of the continued price strength of trucks and continued growth of younger, lower-mileage, higher-priced off-lease supply. Recalls also played a role in the overall positive price performance (please see “Details” below), so it is not clear how wholesale prices might have fared absent the supply curtailments “stop-sales” caused. Nevertheless, retail used vehicle sales, especially near-record CPO sales, remain strong, providing demand-side support for wholesale values.
According to ADESA Analytical Services’ monthly analysis of Wholesale Used Vehicle Prices by Vehicle Model Class1, wholesale used vehicle prices in July averaged $10,362 – down 2.0% compared to June but up 4.9% relative to July 2015. The year-over-year rise was again due to the strength of truck prices, whereas car prices fell on an annual basis. Most segments experienced seasonal month-over-month declines.
Average wholesale prices for used vehicles remarketed by manufacturers were up 0.6% month-over-month and up 10.2% year-over-year, as manufacturers sold almost 20% fewer units this year than they did last July. Recalls are playing a major role in this reduction, as vehicles are “stop-sale’d” awaiting parts and/or OK’s from manufacturers for sale. Prices for fleet/lease consignors were down 2.5% sequentially but up 3.1% annually, as these consignors sell more younger, lower-mileage off-lease units than they did last year. Dealer consignors registered a 1.1% decrease versus June but a 5.3% increase relative to July 2015.
July CPO sales were up up 4.8% month-over-month and up 5.6% year-over-year, according to figures from Autodata.
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 - July 2016
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