Wholesale Prices Halt Three Months of Declines – Remain Flat in February

By Jonathan Smoke
Cox Automotive 

Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) remained flat month-over-month in February. This brought the Manheim Used Vehicle Value Index to 131.0, which was a 5.1 percent increase from a year ago, yet was the lowest level since last July.

On a year-over-year basis, all major market segments except midsize cars saw gains. Pickups and vans outperformed the overall market. 

As expected, now that prices are more in line with the general trend prior to last year’s hurricanes, the rapid acceleration of depreciation has slowed to normal. We will likely miss the normal “bounce” in used vehicle prices in March as tax refunds will again be delayed as part of the IRS effort to combat identity fraud. Weekly tax refunds for the week ending February 16 were down two percent versus a similar time period last year equaling almost $2 billion in refunds. However, in the week ending February 23, the number and total amount of refunds were up year-over-year during a similar week in 2017, suggesting an increase in the rate of tax return processing. Prices should be on firmer footing by April as retail demand kicks into gear.

Rental risk pricing strengthens. The average price for rental risk units sold at auction in February was up four percent year-over-year. Rental risk prices were up two percent compared to January. Average mileage for rental risk units in February (at 46,300 miles) was 11 percent above a year ago.

New vehicle sales decrease in February. February new vehicle sales volume decreased two percent year-over-year with the same number of selling days compared to February 2017. February seasonally adjusted annual rate (SAAR) came in at 17.0 million, down from last year’s 17.3 million; but it’s the sixth straight month of more than 17 million SAAR. Cars continue to see sharp declines as sales in February fell 13 percent compared to last year, with major car segments’ having sales declines. Light trucks outperformed cars in February and were up four percent year-over-year.

Combined rental, commercial, and government purchases of new vehicles were up four percent year-over-year in February, led by increases in commercial (plus-four percent) and rental (plus-five percent) fleet channels.

New vehicle inventories remained below four million units for the eighth straight month, but inventories are at their highest level since June 2017.

Used sales increase in February. According to Cox Automotive estimates, used vehicle sales increased by two percent year-over-year in February versus last year. The February used SAAR came in at 39.6 million units.

Consumers driving strong economic momentum. Consumer confidence in February was the highest reading in more than 17 years. Likewise, consumer sentiment rose to its highest reading in more than 13 years. Both increases suggest the consumer is buoyed by lower taxes that are starting to be seen in paychecks. Consumer spending continues to be strong and is driving the economy. The first two months of the year saw severe winter weather and marginal declines in new sales, but higher paychecks from tax reform combined with tax refunds should see improving retail spending including auto sales this spring.

The Cox Automotive Used Car Market Report & Outlook arrives March 23. Our Economic Industry Insights team will release the Cox Automotive Used Car Market Report & Outlook (previously known as the Manheim Used Car Market Report) at the National Automobile Dealers Conference on March 23. 

The report, now in its 23rd year, has been expanded to include perspectives from across Cox Automotive’s family of brands, while remaining true to its legacy of providing salient data, smart insights and keen industry observations. You will be able to read the full report, including the fleet section, on coxautoinc.com after its release on March 23.

Jonathan Smoke is Chief Economist for Cox Automotive. Follow Jonathan on Twitter at @SmokeonCars for the latest industry research and insights.