Manheim Index Declines Slightly In June

If NAFA members feel as though they've been remarketing more vehicles at auction and receiving higher prices for those cars lately, their instincts are accurate. According to an analysis of Manheim data, end-of-service commercial fleet volumes have risen at auction, despite the delivery delays and cancellations that some fleet managers have experienced in acquiring replacement units. Along with this rise in volume, the mileage and seasonally adjusted index of pricing for end-of-service midsize fleet cars reached a new high in June.

Manheim Index Declines Slightly in June

This increase in wholesale pricing for end-of-service fleet vehicles came while overall wholesale used vehicle prices (on a mix, mileage, and seasonally adjusted basis) decreased modestly in June from their record level in May. Wholesale used vehicle values before the seasonal adjustment fell 1.6 percent. After the seasonal adjustment, they declined 0.2 percent.

The Manheim Used Vehicle Value Index in June was 127.5, which represented a 6.1percent increase from its year-ago level. Despite the pullback in gasoline prices, compact and midsize cars continued to be the strongest segments in the market. Indeed, they are now the only two major segments that have meaningful year-over-year gains.

Dealer consignment volumes rose despite softening new and used vehicle retail sales. The pace of new vehicle sales disappointed in June as the seasonally adjusted annual rate (SAAR) slipped to 11.4 million from 11.8 million in May at a pace of more than thirteen million in the first four months. Although May and June sales were constrained by low inventories (and an accompanying decline in incentives), one has to worry that the softness in the overall economy may also have been a factor.

The loss of more than 100,000 units in fleet sales also kept the total SAAR in check. Normal fleet deliveries would have pushed the May and June SAAR into the 12.2 million range. As such, we believe the trough in new vehicle sales has passed. By August, the SAAR should be back close to thirteen million, provided, of course, the economy also improves.

Small car pricing remains strong. As noted, compact and midsize cars are the only two segments with meaningful gains over the past year. Over the past quarter, only compact cars fit that description. Although compact cars have accounted for a growing share of new vehicle sales in recent years, their share of auction volume has declined slightly in recent months. This is a reflection of the inventory shortage on the new vehicle side, which keeps used units out of the wholesale market.

Tom Webb is chief economist for Manheim Consulting. Contact him at Thomas.webb@manheim.com, follow him via Twitter at www.twitter.com/TomWebb_Manheim and read his blog at www.manheimconsulting.typepad.com.

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