Used Market Update: August 27, 2020
Wholesale auction sales of vehicles up to 8 years old for the week ending August 23 were essentially unchanged vs. the previous week (week ending August 16). Sales for the period reached an estimated 94,000, only slightly less than the previous week’s 95,000-unit figure. While wholesale sale volumes remain healthy, sales during the past two weeks have been an average of 8% less than the J.D. Power pre-virus forecast.
Weekly Wholesale Auction Sales (thousands)
Segment-level auction sales on the mainstream side of the market increased an average of 3%. Midsize van sales grew the most, increasing an average of 17% for the week. Further down the line, small and large car, along with midsize pickup and large SUV sales outpaced the overall mainstream average increasing from 4% to 11%. On the opposite end of the spectrum, compact and midsize SUV segments experienced sales declines of 5% and 8%, respectively. Remaining mainstream segments sales were essentially flat compared with the previous week. On the premium side of the market, sales were reduced an average of 5% for the week. Sales for most premium segments declined, however, large premium SUV experienced a 6% increase and sales of compact and large premium cars were flat. Sales results for the remaining premium segments were all negative week over week, with sales down between -3% for midsize premium car to -18% for small premium SUV.
Wholesale Auction Prices Soften for the First Time in 17 Weeks
After several weeks of slowing price appreciation and flat price movement the week ending August 16, wholesale auction prices moved lower for the first time in 17 weeks during the week ending August 23. As a result, prices were reduced an average of 0.7%. While wholesale prices are beginning to soften, it’s important to remember that they remain 35% higher than the trough in April, and nearly 15% above the level at the beginning of March.
Weekly Wholesale Auction Price Index (Mar 1 = 100)
Wholesale prices for mainstream segments declined by a 0.8% the week ending August 23 when compared with the prior week. Prices on the mainstream side were down across the board. However, losses for the week were generally mild. For example, midsize pickup and small car prices were flat to down slightly, moving 0.1% and 0.3% lower, respectively, from the previous week. At the opposite end of the spectrum, due in large part to sizeable wholesale sales and increased competition, midsize van prices were reduced an average of 2.2%. Premium prices once again performed slightly better than their mainstream counterparts. On average, premium segment prices fell a slight 0.2%. While most premium segments experienced small price declines, compact premium car prices improved 0.5%, while small premium car prices were reduced an average of 1.3%.
Wholesale prices remain strong despite a softening used wholesale market. Prices are expected to continue to move lower through the remainder of August and into September as pent-up demand wanes and pandemic-related macro-economic headwinds increase. By year's end, prices are expected to be slightly greater than pre-virus levels. It is important to note, however, that while the outlook is relatively optimistic, there remains a great deal of uncertainty surrounding the impact of new virus outbreaks, the potential for another round of federal stimulus, overall employment conditions, and also we can’t overlook the potential need for replacement units if Hurricane Laura destroys large numbers of vehicles in the Louisiana-Texas area. Given these unknowns, a heightened degree of market volatility should be expected.
Used Vehicle Retail Sales Performance Flat While Prices Continued to Rise
Sales of used vehicles at franchised dealers were 4% below pre-virus forecast for the week ending August 23. Used retail prices rose once again, increasing by 0.4 percentage points vs. the prior week. Prices remain approximately 7% higher than pre-virus levels.