Used-vehicle prices could fluctuate at times this year but are expected to remain healthy overall, Tom Webb, Manheim's chief economist, predicted today.
Webb said the market fundamentals that kept used-vehicle prices relatively high last year -- such as employment growth, readily available retail financing and strong retail used-vehicle demand -- are expected to remain mostly unchanged in 2014.
But "a few missteps may occur along the way," Webb told analysts and reporters during Manheim's quarterly conference call.
For example, wholesale vehicle supplies in the first quarter may rise faster than expected, Webb said. He noted that the auction volume of vehicles sold by rental-car companies in the last quarter of 2013 was low. An influx of retired rental vehicles may hit the wholesale market in early 2014, he said.
Additionally, prices of vehicles in lower-end segments may soften on weaker-than-anticipated demand. He said retail buyers of those vehicles, who are often dependent on income-tax refunds to make their down payments, may be "disappointed" by what he called uneven, unpredictable and relatively low disbursements from the IRS.
Webb pointed out that off-lease volume, which is predicted to grow "significantly" in 2014, will put downward pressure on used-vehicle prices, but "it does not demand a collapse in prices, especially not this year."
He warned that the influx of additional off-lease volume in 2016 could present a "challenge," but said it's a challenge for which the industry has time to prepare. "We know it's coming," he said.
Overall prices of used-vehicles dipped in 2013, but remained historically high, according to Manheim data.
The Manheim Used Vehicle Value Index average was 121.4 for the year, down 1.8 percent from 2012, and was 121.7 in December, down 1.9 percent from December 2012.
The index is adjusted for vehicle make, mileage and time of year.