Current Monthly Index

Manheim Index Declines in July

Wholesale used vehicle prices (on a mix, mileage, and seasonally adjusted basis) fell for a second consecutive month in July. The rate of decline in July was greater than in June, but the magnitude and duration of the previous run up in wholesale pricing means that used vehicle values are still at historically high levels. Indeed, the Manheim Used Vehicle Value Index for July was 118.9, which represented a 3% increase from a year ago.

Valuations for late-model used vehicles in the coming months will be increasingly influenced by the ability to manage carryover inventories and new model introductions. Last year, carryover inventory was flushed out by the cash-for-clunkers program. This year, a low inventory unit count (and hopefully an improved labor market) should provide enough natural demand to handle the transition.

New and used vehicle retail sales: a strong recovery still awaits.  New vehicles sold at a seasonally adjusted annual rate of just 11.5 million in July, according to newly revised seasonal adjustment factors produced by the Federal Reserve Board. This put July's new vehicle sales pace below that achieved in March and May of this year. The level of sales is also still below basic replacement demand and is reflective of an economy that is producing only meager income gains

Franchised dealers had weak used vehicle sales in July (according to preliminary numbers from CNW Marketing Research), but that was on the heels of a strong second quarter. The publicly-traded dealership groups reported (on a sales-weighted basis) a 13% increase in same-store used retail sales for the second quarter. And, importantly, the increase in volume was achieved without any further erosion in gross margins.

Pricing for end-of-service fleet units varies by market class.   Prices for midsize cars coming out of commercial fleets retreated in both June and July after hitting new records in March, April, and May. The average price received for these units at auction remains well above year-ago levels.

For most fleet managers, any easing in price for midsize cars that may have been experienced in July was more than offset by exceptionally strong pricing for pickups and vans. Many of the pickups coming out of fleets in July had lower-than-normal mileage and attracted strong bidding.

Prices for off-rental units continue strong.   The average price for a rental repurchase unit sold by the Detroit 3 hit a new high of more than $22,500 in July. This was the result of low supplies, lower mileage, and a richer mix of models.Rental risk units had an increase in average price for both the month and year-over-year. As expected, the average mileage on a rental risk unit stabilized in July after declining in the first half of the year.

Market class and price tier data reveal strength in selective segments. In July, as well as for the first seven months of 2010, luxury vehicles have underperformed the overall market. That’s because they are not experiencing the same restricted supplies that exist for the other market classes. Many SUV models showed weakness in July, but, as a class, the segment is still up substantially year-over-year. Market classes with strength in July included compact cars and full-size pickups.

With respect to price tiers, the weakest segment on a year-over-year basis has been vehicles in the $20,000 to $25,000 price range. The two strongest segments were vehicles priced between $6,000 and $7,000 and those priced between $13,000 and $14,000.