December 2012 Used Vehicle Value Index
Article is from the Manheim website for December 2012.
By applying statistical analysis to its database of more than 5 million used vehicle transactions annually, Manheim has developed a measurement of used vehicle prices that is independent of underlying shifts in the characteristics of vehicles being sold.
The Manheim Index is increasingly recognized by both financial and economic analysts as the premier indicator of pricing trends in the used vehicle market, but should not be considered indicative or predictive of any individual remarketer’s results.
Current Monthly Index
Manheim Index Rises Again in December
Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) rose 1.2% in December. With the Manheim Used Vehicle Value Index closing out the year at 124.1, the year-over-year decline was reduced to a modest 0.8%. On an annual average basis, the decline in the Manheim Index was 1.0%.
The trend in wholesale pricing during 2012 consisted of a relatively flat first quarter, followed by declines in the second and third quarter, and then a strong upward rally in the fourth quarter. It is not a pure coincidence that this was the same pattern exhibited by other major economic variables, such as employment, retail sales, and consumer confidence, each of which also slowed in the middle part of last year. The strong rise in wholesale used vehicle prices in the fourth quarter was also a byproduct of the smooth model year transition in the new vehicle market as well as the reduced supply and increased demand created by Hurricane Sandy.
Manheim Used Vehicle Value Index
Manheim Used Vehicle Value Index
New vehicle sales finish the year on a strong note. New car and light duty trucks sold at a seasonally adjusted annual rate of 15.4 million in December as activity continued to be supported by pent-up demand, greater credit availability, and targeted incentives.
For the full year, new vehicle sales reached 14.5 million. That was fully one million units higher than what the consensus forecast called for at the beginning of the year. The fact that sales surprised to the upside explains how inventory levels were kept in check during the year, which, in turn was a major support for wholesale used vehicle values during the year. The supply of new units on dealer lots (on a twelve month rolling basis) has remained below 60 days for 33 consecutive months – the longest stretch ever.
Used vehicle retail sales top 40 million in 2012. Used vehicle sales also finished 2012 on a strong note as dealer deliveries rose 18% in December, according to CNW. For the year, dealer used vehicle retail sales rose 5%. Although dealers faced margin pressure throughout the year, faster inventory turns, operating efficiencies, and strong F&I income kept used vehicle operations very profitable.
Further growth in new and used vehicle markets expected for 2013. With wholesale supplies increasing in 2013 and credit availability likely to remain good, used vehicle dealers should see increased sales again in 2013. But, of course, economic risks remain.
The temporary avoidance of the fiscal cliff was a positive, but the fact remains that 77% of all U.S. households will face higher taxes this year relative to 2012. That’s a result of the loss of the temporary two percentage point reduction in the payroll tax. To be sure, no one expected the payroll tax holiday to be extended (and it wasn’t great economic policy), but that doesn’t mean that households now experiencing a $75 to $100 loss in after-tax monthly income won’t alter behavior. Furthermore, with businesses shifting bonuses, stock options, and special dividends into the latter part of 2012, economic activity the coming year may have an atypical seasonal pattern.
Rental risk pricing remains strong. The size of the total rental fleet increased by 5% in 2012 to just under 1.86 million units, according to Auto Rental News. That promises increased wholesale supplies in 2013 as vehicles cycle in and out of the fleet. The pricing performance of rental risk units at auction over the past year suggests that dealer will be more the willing to absorb to the greater volume.
In December, the average auction price for rental risk units remained in the same narrow range they have been in all year. Average mileage declined marginally during the month and the volume sold remained slightly depressed due to delayed defleeting.
Midsize cars show the greatest pricing strength. Over the past month, past three months, and past year, midsize cars have shown the largest wholesale price increases. Mark it up to ongoing demand shifts in the retail market and stronger product offerings in the wholesale market. For the year, luxury cars and SUVs/CUVs had the weakest pricing, however, both segments consist of wide variety of models, some of which, performed opposite to the overall segment.
Price Changes for Selective Market Classes
December 2012 vs December 2011