Wholesale Prices, Week Ending April 10th

This past week did not set another record, but the market is still experiencing week-over-week increases that are in record-breaking territory. The tax season price friendly segments of Sub-Compact and Compact Cars as well as Crossovers saw value increases pushing over the 2% mark.

                                      This Week    Last Week    2017-2019 Average (Same Week)

Car segments                    +1.78%      +1.99%           +0.18%

Truck & SUV segments   +1.48%      +1.73%           +0.03%

Market                              +1.59%      +1.82%          +0.09%

Another major development that we are seeing in the wholesale market is a substantial increase in prices that dealers are willing to pay for higher mileage units, especially on newer (0-to-2-year-old) used vehicles. Because of this development, Black Book started updating our mileage sensitivity curves on a weekly basis instead of the typical monthly cadence.

Car Segments

• Car segments this past week, continued to have large gains (+1.79%), but the rate of increase slowed compared to the week prior (+1.99%).

• All nine Car segments had another week of gains exceeding +1.00%, with Compact (+2.54%) and Sub-Compact (+2.04%) Car segments exceeding 2%.

• Prestige Luxury Cars had the smallest level of gain at +1.09%. By comparison, the same week in 2019 had Prestige Luxury Cars declining -0.28%.

• Compact Cars set a record for the segment with an increase of +2.54%. It is expected for this segment to increase this time of year, but not by this amount. This same week in 2019 had an increase of +0.53%.

Truck Segments

• Large Truck segment gains continued this past week (+1.48%), but it was at a lower level compared to the record setting previous week (+1.73%).

• All thirteen truck segments reported gains, with ten exceeding 1.00%.

• Compact (+2.23%) and Sub-Compact (2.07%) Crossovers exceeded 2%, this is the second week in a row of weekly gains increasing greater than 2% for the Sub-Compact Crossover segment.

• Despite the OEMs doing their best to prioritize Full-Size Truck production, new inventory continues to be limited which continues to put pressure on the used market. Full-Size Trucks had another large week of increases (+1.57%).

Newer Used Vehicles (0-2-year-old)

Driven by an extreme shortage of rental returns and limited inventory of new vehicles, the price trends of newer used vehicles have seen large weekly gains, many weeks exceeding those of the older models. The table below shows the average weekly price changes for 0-2-year-old vehicles.

                                        This Week    Last Week    2017-2019 Average (Same Week)

Car segments                       +1.54%    +2.00%          +0.18%

Truck & SUV segments      +1.37%    +1.55%          +0.04%

Market                                 +1.42%    +1.68%         +0.09%

Weekly Wholesale Index

2020 ended with used wholesale prices at elevated levels. With economic patterns (including the automotive market) driven by the pandemic, normal seasonal patterns (e.g. 2019 calendar year) in the wholesale market were not observed for most of the year. We saw a similar picture in 2009, at the end of the Great Recession. It appears that 2021 will not have typical seasonality patterns. The spring market arrived about 7 weeks earlier and with much stronger price increases compared to a typical pre-COVID year. The graph below looks at trends in wholesale prices of 2-6-year old vehicles, indexed to the first week of the year.

Monthly Retention Index (March)

As we have reported for the last two months, wholesale prices have been increasing at an unprecedent rate. Black Book’s Used Vehicle Retention Index in March was 141.2 points, an 8.9 point (or 6.7%) increase from February (132.3). The Index currently stands 23% above where it was this time last year, right before the record drop due to the start of the COVID-19 related economic closures.

Retail (Used and New) Insights

• The highly anticipated Santa Cruz from Hyundai is set to debut this week on April 15th. The all-new model will be the mixture of a crossover and truck and will be built on a unibody platform.

• In more product news, GMC announced the future expansion of the Hummer EV line-up. This time it will be a family-oriented SUV that is set to begin production in 2023.

• Chip shortage related production delay announcements have become the norm each week recently. GM, Ford, and Hyundai were just some of the recent OEMs to announce new disruptions to production. Ford announced they will not have their normal summer shutdowns at the majority of their plants due to the shortage that has plagued them for months.

Used Retail Prices

With the proliferation of ‘no-haggle pricing’ for used-vehicle retailing, asking prices accurately measure trends in the retail space. Retail demand slowed down at the end of last year, and thus resulted in declining retail asking prices over the last several weeks of 2020. As demand rebounded in January, retail prices seemed to lag wholesale prices – retail asking prices continued to decline throughout January and remained stable in February. March had an accelerated growth in retail prices, but the rate of growth is still lower compared to the increases of wholesale prices. In April, retail prices picked up speed as demand accelerated fueled by stimulus payments, tax season, and shortages of new inventory. This analysis is based on approximately two million vehicles listed for sale on US dealer lots.  The graph below looks at 2-6-year-old vehicles (similar to our wholesale price index).

Volume

Used Retail

Used retail listing volume stayed essentially flat since the beginning of the year but remains at levels above where the industry was in January, during the pre-COVID time of 2019.

Days-to-turn have been increasing since November and was approaching a historic average level at the end of February. However, this trend has reversed since the middle of March, as retail demand picks up across the country as a result of tax returns and the additional round of $1,400 stimulus checks being deposited into consumers’ bank accounts.

Wholesale

• New and used inventory continues to be in short supply on dealer lots, further fueling the demand at the auctions. No-sales in recent weeks have not been due to lack of demand, but instead the result of high floor pricing and deteriorating quality of units offered.

• As new production continues to struggle to meet demand, the fleet and rental companies are holding onto their vehicles longer, further depleting the availability of used vehicles in the marketplace.

• Recalls are another challenge for some sellers and buyers as the manufacturing delays are slowing down the access to parts necessary to make the fixes that would free the vehicles up for retail sale.

• The deteriorating condition of available units is leading to higher costs for buyers before it reaches their front-line. Additionally, the level of reconditioning necessary is further delaying the time required before a vehicle is ready for retail.

READ: Overcoming Objections of Our Own Making