Why used-car pricing indexes vary
Used-vehicle price indexes paint different pictures
For months, headlines have declared that used-vehicle prices are falling because of rising new-vehicle incentives and a glut of off-lease vehicles.
But that's not what the Manheim Used Vehicle Value Index has shown. The index sat at a record high in May following months of stability near previous highs.
That puts the Manheim index at odds with other indicators. The NADA Used Car Guide Used Vehicle Price Index fell 7.6 percent in May from a year earlier. The Black Book Used Vehicle Retention Index last month reached its lowest level since November 2010.
Tom Webb, Manheim's outgoing chief economist and creator of the index, said it comes down to differences in the indexes' methodologies. For example, the Manheim index does not factor for adjustments in new-vehicle pricing and thus tends to drift higher because of inflation and additional content on vehicles.
"Given that you had new-vehicle price increases while used-vehicle prices have stayed level, that means your residual values have declined, which is what some of these other measures are trying to get at," Webb said.
Lenders are particularly interested in trends in residual values, which can help them anticipate how much a car they lease to a customer today will be worth when the lease expires in three years.
In addition, the Manheim index analyzes prices on used vehicles of any age. The NADA Used Car Guide is restricted to vehicles 8 years and younger, while the Black Book index monitors those between the ages of 2 and 6 years.
Regardless of the index numbers, Webb said most indications are that the industry has been able to weather the flood of off-lease vehicles returning to market, at least for now.
"May was a little bit stronger than I would've anticipated," Webb said. "But the stability we've seen overall hasn't been surprising."
That's because dealers are still able to get customers easily financed, even as large auto lenders including Ally Financial, Capital One and GM Financial indicate they are pulling back from lending to subprime customers.
The availability of retail financing "has not been an issue, despite some of the headlines you read in the press about big lenders pulling back," Webb said. "They don't have a problem getting people financed, which is the key in a healthy market."
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