Backed by strong consumer demand, the used car market enjoyed a solid start to 2015 as wholesale used vehicle prices in the first quarter rose 1.3 percent from a year ago and 1.6 percent compared to the fourth quarter of 2014.
The Manheim Used Vehicle Value Index – a measure of wholesale prices adjusted for mix, mileage and season – began the year at 124.5, which was virtually identical to last year’s reading of 124.4.
A stable job market and attractive financing helped maintain momentum for the retail market for new and used vehicles. The strongest demand for used vehicles in the first quarter was in the $15,000 to $20,000 and $20,000 to $25,000 pricing tiers, while weakest continued to be in the $9,000 to $11,000 range.
“The used vehicle market is off to a good start in 2015, with wholesale prices remaining above trend level thanks in part to continued strong profit opportunities in the retail market,” said Manheim chief economist Tom Webb. “With pricing slightly stronger than expected, consumers continue to see the value in purchasing used vehicles, which remain a profitable part of a dealer’s business.”
First quarter wholesale pricing for vehicle segments included:
- Compact car prices were down 5.2 percent in March, compared to the same period last year and again continued to be the weakest segment.
- Midsize cars remains one of the weaker segments and was also down compared to the same period last year, but saw a much more modest decrease of 1.9 percent.
- Luxury car values increased 1.3 percent over the same period last year. A segment that is now even year-over-year with the market, it is expected values will bounce back down in April.
- Pick-ups and vans once again won the top spot for the strongest vehicle segment with pick-ups up 5.4 percent and vans up 5 percent on a year-over-year basis. With fewer available vehicle segments – combined with being popular for business use – demand for these vehicles is expected to remain strong.
- SUV and CUV is typically one of the stronger segments but remained virtually identical to the same period a year ago, with a slight decrease of 0.2
percent.
It is expected the economic backdrop will remain favorable for used vehicles purchases – at least in the near term. Additionally, any slight variance – even up to a full point – in interest rates should not materially impact today’s very favorable retail financing environment. Illustrating the industry’s continued momentum, manufacturer CPO sales continued their record pace, up 8 percent in March and 11 percent year-to-date.
Published in the May 2015 Edition of American Recycler News
