Used Car Prices Dropping – Manheim Consulting publishes the latest update of its used vehicle value index on the fifth working day of each month. To receive reminders about these updates and Jonathan Smoke’s quarterly conference calls, please email [email protected].
You’re invited to join Cox Automotive Chief Economist Jonathan Smoke and Senior Manager of Economic and Industry Insights Chris Frey to discuss the latest Mannheim Used Vehicle Value Index and key economic and industry trends for the quarter. Jonathan and Chris are joined by Jeremy Robb, Senior Director of Customer Analytics at Manheim, who highlights key wholesale pricing and sales conversion metrics.
Used Car Prices Dropping
Email [email protected] with questions or requests for data. To receive regular updates on the Manheim Used Vehicle Value Index, as well as direct invitations to the quarterly call, please subscribe to our Cox Automotive newsletter and select the Manheim Used Vehicle Value Index quarterly calls.
Calculated Risk: Wholesale Used Car Prices Declined In September; Prices Down Slightly Year Over Year
Through statistical analysis of its database of more than 5 million used car transactions per year, Manheim has developed a measure of the price of used vehicles that is independent of changes in the characteristics of the vehicles sold. Check out the index’s methodology.
The Manheim index is increasingly recognized by both financial and economic analysts as a leading indicator of price trends in the used car market, but it cannot be considered an indicator or predictor of the results of individual remarketers.
Wholesale prices of used vehicles (combined, mileage and seasonally adjusted) rose by 0.4% compared to October in the first 15 days of November. The mid-month Mannheim commercial vehicle value index rose to 200.7 points, which represents a 13.7% decrease compared to the entire month of November 2021. The unadjusted price change in the first half of November represents a 0.8% decrease compared to October, which reduces the unadjusted value. annual average price by 11.7%.
Over the past two weeks, Manheim Market Report (MMR) prices have shown a fairly normal decline for the season, resulting in a cumulative decline of 1.1% in the three-year MMR index, which represents the largest cohort of the model year. at auction. In the first 15 days of November, MMR retention, which is the average price difference to the current MMR, averaged 98.4%, indicating that valuation models are ahead of market prices. The average daily sales conversion rate of 50.7% in the first half of November decreased compared to the daily average of 51.3% in October. Despite this, conversion rates typically decrease in November, and the conversion rate was similar to the daily average in November 2019. Recent trends in key indicators suggest that used vehicle wholesale values should decline in line with normal trends in the second half of November. .
Used Car Price Drop Hurts Auto Dealers But Helps Federal Reserve On Inflation
Continuing the October trend, seasonally adjusted prices in all eight main market segments were lower in the first half of November compared to the same period of the previous year. Compact cars had the lowest decline of -9.5%, while sports cars, pickup trucks, vans and midsize cars lost less compared to the overall industry in the seasonally adjusted year-over-year change. Prices rose in five major segments compared to October, with full-size, luxury and midsize cars underperforming the industry. Only sports cars and vans showed unadjusted price increases compared to October.
Retail and wholesale daily supply is normal in mid-November. Based on estimates based on vAuto data as of November 14, retail days inventory used was 49 days, two days less than at the end of October. The supply of days increased by seven days compared to the previous year, but even in the same week in 2019. Using sales and inventory data from Mannheim, we estimate that wholesale inventory ends in November at 28 days, unchanged from the end of October, but eight days. more every year. As of Nov. 15, wholesale inventories stood at 28 days, unchanged from the end of October, but up seven days year-over-year and down one day from 2019. The stock used refers to supply measured in stock days and compared to 2019. is normal for this time of year, which indicates that depreciation should also be normal for the time of year.
Rental risk prices are mixed, miles lower in the first two weeks of November. The average price of rental risk units sold at auction in the first 15 days of November rose by 1.5% year-on-year. Rental risk prices were 0.3% lower compared to the entire month of October. Average mileage for rental risk units in the first half of October (55,400 miles) was down 26.8% year over year and 2.9% month over month.
Consumer sentiment changed in a mixed manner at the beginning of November. The University of Michigan’s initial October consumer sentiment fell 8.7% to 54.7 as views of current conditions fell further and expectations for the future also declined. Expected inflation rose slightly. Consumers’ opinion of vehicle buying conditions has eased, but is still the second best value since March. June was an all-time low for the reading. Morning Consult’s daily consumer sentiment index shows sentiment rising at the start of the month. The more timely measure indicated that consumer sentiment rose 2.3% in the first 15 days of November. That lower measure coincided with a drop in gas prices in early November, an improving stock market and a relatively calm midterm election. We have detected that you are using Internet Explorer. Please upgrade to a modern browser for the best experience. CHROME SAFARI FIREFOX
Used Car Prices Set For Drop Off In A Reprieve For Buyers
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Used car prices have returned to levels last seen in mid-2021 and look set to decline further. This may be good news for American consumers, but not good for companies involved in the automotive value chain.
The Mannheim Used Car Value Index – the main measure of used car prices – reached 200 in October. This is the fifth consecutive decline in the index.
February Actually Saw A Drop In Used Car Prices
The October number reported on Monday is about 2% lower than in September, which is 11% lower than a year ago and about 15% lower than January’s peak of 236.3. Used vehicle prices are looking better.
The two main, interrelated reasons are slowing demand and rising interest rates. Benchmark analyst Mike Ward, citing data from the National Automobile Dealers Association, said used car sales fell 13% in the third quarter compared to the same period last year. Most cars are financed by both, so rising interest rates could hurt demand for new and used vehicles by increasing monthly payments.
Prices may fall further as working inventory recovers. Dealer inventories of new light vehicles rose to about 1.54 million units in October. This is the highest amount since April 2021 and is 51% higher than a year earlier, though still half the normal level. The lack of parts limited car production for several quarters.
The prices of new and used cars are always related. If one set of prices rises too much relative to the other, buyers will switch to the better value until things adjust.
Used Car Prices Dropping In 2022, But Monthly Payments Rise
Falling prices are a headwind for most auto stocks. Dealers are facing shrinking margins on their existing inventory, a particular problem now that rising interest rates and a slowing economy are hurting demand. Auto lenders such as Ally Financial (ticker: ALLY) rely on estimates of the value of used cars when making loans. The lower price of used cars can affect their earnings.
Falling prices are also not good for car manufacturers, although the weakening of demand is not such a big problem for them at the moment. Unit sales of new cars are already at recession-like levels due to limited production.
Auto parts manufacturers are not affected. The health of the auto market affects parts manufacturers, but parts prices have not risen as much as car prices in recent years.
Lower production and cost inflation have been more of a problem for this part of the automotive value chain. Parts giant Magna International’s ( MGA ) stocks, for example, are down about 30% year-to-date.
When Will Used Car Prices Drop?
Falling prices usually worry investors. Deflation can create a vicious cycle in which buyers stand aside and wait until car prices drop further.
Some of the fear is already reflected in share prices. Auto and auto parts stocks in the Russell 3000 are down about 35% on average year to date, while the S&P 500 and Dow Jones Industrial Average are down about 21% and 10%, respectively.
Shares of Ford Motor ( F ) and General Motors ( GM ) trade for less than seven times expected 2023 earnings per share. Shares of Lithia Motors ( LAD ) and Ally trade for less than six times estimated 2023 earnings.
These ratings indicate that investors are concerned about declining earnings. Even though multiples are low, investors don’t like to get involved and don’t buy falling stocks until the bottom is in sight.
Just What Factors Into The Value Of Your Used Car?
Aftermarket automakers like O’Reilly Automotive ( ORLY ) enjoy lower inventory and higher prices. This means people keep their cars longer. Higher values mean owners can justify spending more on their existing vehicles.
O’Reilly’s stock sold out
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