Used vehicle prices hit new record, sales dip
Wholesale used vehicle prices hit a new high in September as sales continued to moderate, economists said. Prices are expected to remain high and could increase amid strong demand for vehicles leading to tax refund season in spring 2022.
In a recent conference call, Kayla Reynolds, head of economic and industry outlook for Cox Automotive, said wholesale used vehicle prices on a blended, kilometer and seasonally adjusted basis rose 5.3% in September. compared to August. As a result, the Manheim Used Vehicle Value Index reached an all-time high of 204.8, an increase of 27.1% from September 2020.
âThe September change aligns with the fact that we are now seeing the impact of inventory and pricing issues in the market,â Reynolds said. “New vehicle prices peaked in December and peaked again last month to an all-time high.” She added that recent price increases in the used vehicle market can be attributed to a lack of inventory to support demand.
Jonathan Smoke, chief economist at Cox Automotive, said COVID-19 and storms impacted economic activity in September, but excluding the travel industry, consumer spending is on the rise from 2019 levels. Consumer spending on vehicles is also up from 2019 levels, with prices playing a role in the rise.
âThis consistency in vehicle spending is largely a product of inflation, as activity measured in units definitely slowed down during the transition from spring to summer,â Smoke said. He noted that prices generally increase closer to 2%, not the 27% recorded in September.
âWhen prices go up, people tend to slow down purchases of goods,â he added.
In June, the new vehicle market was hit by supply issues, while used vehicle sales were hit by rising prices, he explained. In August, new vehicle sales fell as the supply problem worsened, but used vehicle sales improved as prices stabilized. In September, both vehicle markets slowed down, but the used vehicle market is doing better, Smoke said.
In September, the seasonally adjusted annual rate of new retail vehicle sales fell to 10.7 million from 11.4 million in August. Meanwhile, the seasonally adjusted annual rate of second-hand retail sales was stable at 19.5 million.
Smoke noted that worsening new vehicle production problems have led Cox Automotive to downgrade its annual new vehicle sales forecast. He expects new vehicle sales to have bottomed out and production and supply conditions “to turn slowly towards the end of this year.” Conditions are expected to gradually improve in 2022, he added.
New vehicle sales are expected to be between 15 million and 15.5 million in 2021, with sales slowing in the second half of the year. Second-hand retail sales are expected to reach 24.1 million in 2021.
In mid-September, new vehicle inventory was down 75% from 2019 levels. At the same time, used vehicle inventories were down 21%. Used inventory is up slightly from 2020 levels.
âPut simply, the contrast couldn’t be more different,â Smoke said. âConsumers see very limited choices on new vehicle lots, but much better used options. “
Even so, the commercial auction inventory is less than half of pre-COVID levels. Kevin Chartier, vice president of Manheim Consulting, said about 15% of normal volumes of leased vehicles will go up for auction. Meanwhile, auto loan default rates are at record highs and repossession volumes are about a third down from pre-pandemic levels. In addition, the lack of new vehicles is having an impact on the rental car market, and rental vehicles auctioned are at around 40% of 2019 levels.
âGiven current market trends, we expect supply constraints to persist until next year and potentially beyond,â said Chartier, adding that used vehicle prices are expected to continue strong. until the end of 2021.
For vehicles one to three years old, auction values ââhit a new high in September and are up 26 percentage points from 2019, Smoke said. The average price of rental vehicles sold at auction rose 37% in September, compared to the same month in 2020, Reynolds said. The price has also increased by 12% compared to August.
Also on the call, Grace Huang, president of Manheim, said the company is investing nearly $ 100 million in technology, processes and equipment to prepare for electric vehicles (EVs). Huang said the company has partnered with Spiers New Technologies to develop a tool to show the health of electric vehicle batteries and noted that 40% of their cost can be attributed to batteries.
âWe are producing an easy-to-understand dashboard that contains vital information, especially for electric vehicle buyers,â Huang said. âIn our own testing, we have found that electric vehicle batteriesâ¦ with a vital battery dashboard get about five times more views and bids than those that don’t and sell for. 1-4.5% higher values. So dealers, buyers take a very close look at the vital battery dashboard. “