Prices of used vehicles on average dropped in October from prior-month levels, but were higher than they were in October 2012, according to the Manheim Used Vehicle Value Index released today.
Last month, the index stood at 122.3, the first reading since May to show a decline from the previous month. The index was down from 122.8 in September but higher than the 121.9 reading for October 2012. The index is adjusted for model mix, mileage and time of year.
Manheim chief economist Tom Webb, commenting on the index, said an uptick in off-lease vehicle volume and an increase in the number of retired-rental and repossessed vehicles returning to the market are dampening used-vehicle prices, a trend that will continue into 2014.
The spike in used-vehicle prices in November and December 2012 as a result of demand created by Hurricane Sandy will also result in comparisons against year-earlier levels that likely will make used vehicle prices seem softer for the rest of the year.
Still, Webb predicted that the used-vehicle market will remain favorable for dealers.
"The intense increases in prices that we had when supply shortages were very severe did in fact hurt dealers' gross margins on retail sales," Webb said. Gross margins "rarely grow in this industry, but they stop declining, primarily," he said.
He also said that the increase in off-lease vehicles is viewed favorably by dealers because dealers that take back those vehicles from consumers on behalf of the lessors, and then purchase the vehicle from the financing company, "are going to make a sale one way or the other."