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post #1 of 1 (permalink) Old 06-08-2010, 04:09 PM Thread Starter
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Used Car Prices UP

Manheim Index Sets Record Yet Again

June 08, 2010

ATLANTA — Values of used units in the lower- and middle-priced tier played a big role in pushing the Manheim Used Vehicle Value Index to a third straight record reading and sixth consecutive monthly increase for May,

Values of late-model units were healthy, as well, according to Tom Webb, chief economist at Manheim.

Specifically, the index read 121 for May, up 10.9 percent from the same period of 2009. There was a 1- percent dip in prices prior to seasonal adjustments being made. Once adjustments were done, there was a 0.2-percent uptick in price.

"May's strength was driven, in large part, by vehicles in the lower- and middle-price tiers, but prices for late-model vehicles also remained strong as they were helped by low levels of new-vehicle inventory," Webb explained.

Looking in more detail at how the decrease in new-vehicle inventory has affected used-vehicle values, in general, Webb pointed out that at the beginning of May, supply had fallen, with there being only 2.1 million new vehicles in inventory. This represented a 56-day supply.

Inventory levels had sunk beneath the 2 million unit mark on a 12-month rolling average basis, marking the "lowest level in more than 35 years of record keeping," Webb pointed out.

"Clearly, a historic change has occurred now that manufacturer restructurings have allowed a movement away from pushing inventory onto dealers," he noted.

It is "hard to overstate" how much "positive impact" has been made on used values, said Webb.

Specifically, dealers have benefited from higher new-vehicle transaction prices, being able to put emphasis on both used and new sales, and the ability to "free up working capital that would otherwise have been allocated to flooring new-vehicle inventory," he noted.

With regards to various segments' year-over-year movements in May, vans led the way with a 17.8-percent upswing, SUV/CUV values were next with an 11.4-percent gain, and pickups followed (up 11 percent).

Compact cars and midsize cars each climbed 10.5 percent, while luxury cars were up 6.9 percent.

Off-Rental Pricing

Examining some individual category trends in more detail, Webb noted that the strength in off-rental units pricing persisted, with prices climbing "modestly" from 2009 and staying static from April.

"The average mileage on rental risk units sold at auction declined for the fourth consecutive month and is now equal to its year-ago level," Webb stated.

He added: "The availability of rental program units at auction remains (and will remain) very low. In May, average prices for these units hit an all-time high, while average mileage fell considerably, both from the previous month and year-over-year."

End-of-Fleet Unit Trends

Next up, Webb looked at end-of-service fleet vehicles, a market segment with "exceptional pricing strength." Dealers have gone after higher-mileage units that have been taken care of well, because there aren't as many low-mileage rides available.

"Clearly, the reduced availability of low-mileage units at auction has prompted dealers to bid up on higher-mileage, but well-maintained, vehicles," Webb shared. "And, of course, the increased availability of subprime financing has made the subsequent retail sale more profitable for dealers."

Last year and the year before, the March-to-June period showed a strong uptick in auction sales of end-of-service units, Webb stated.

"That was reflective of past sales into fleet, a changing seasonal pattern of disposition, and — in the case of 2009 — employee headcount reductions that resulted in early fleet turn-backs," he explained. "In 2010, there was no such surge in the availability of fleet units at auction. Indeed, fleet managers wished that they had more units to sell given that prices were so strong."



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