Supply puts a drag on used prices, but Manheim index rises

Used-vehicle prices rose in May, according to the Manheim Used Vehicle Value Index released Tuesday. The index in May stood at 124.5, up from 123.8 in May 2015 and 122.8 in April 2016. The index is adjusted for vehicle make, model and time of year.“It is a little bit of a surprise” that the index held up so well, Tom Webb, Cox Automotive chief economist, told Automotive News. Used-vehicle prices in general are under pressure from the substantial number of vehicles, especially those coming off lease, that are returning to the market.Webb said the consecutive monthly increases in the index in April and May does not represent a reversal in the expected downward pressure exerted by higher wholesale vehicle supplies. Instead, the increases should be chalked up to efficiency gains that dealers have been able to wring out of their operations.Cost controlsDealers are “turning inventory faster, have less [selling, general and administrative] expenses,” he said, “and higher throughput helps.”Those efficiencies encourage dealers to pay more for used vehicles at auction, confident that they can cover that cost by holding down other costs, he implied.But Webb added that fundamentals suggest prices will decline in the last half of the year.Higher new-vehicle incentives put in place by some manufacturers are expected to have a “slightly negative impact” on used-vehicle residual values in the coming months, Webb said.Black Book said it already is seeing significant used-vehicle depreciation in its data.The average price of a 2010-14 used vehicle on June 1 was $14,432, down 17 percent from the average price on June 1, 2015. Anil Goyal, senior vice president of automotive valuation and analytics at Black Book, said the depreciation as of June 1 “is a little higher than what we had forecast” for the year.Subcompacts vs. pickupsSubcompact cars experienced the highest depreciation of all vehicle segments in that time period.According to Black Book, the subcompact segment plunged 26 percent to an average price of $6,683 on June 1. The subcompact car segment includes vehicles such as Ford Fiesta, Hyundai Accent, Chevrolet Sonic and Nissan Versa.Conversely, full-size pickups as a group held their value well, having depreciated 12 percent to $22,180 on June 1 from a year earlier.“Late last year, we had forecast this year’s depreciation to be 15 percent” on average for all segments, Goyal told Automotive News. “We are coming from 13.2 percent depreciation in 2015. I do expect this to smooth out, but we’re going to take a look at our depreciation forecast in the next month and see if we need to raise it from 15 percent.”

Supply puts a drag on used prices, but Manheim index rises

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