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Release date: 8/11/2020
Used Vehicle Values Set New Record for Second Straight Month
by Jonathan Smoke
Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) increased 5.84% month-over-month in July. This brought the Manheim Used Vehicle Value Index to 158.0, a 12.5% increase from a year ago and a record high for the Index.
Manheim Market Report (MMR) prices improved over the four full weeks of July, resulting in a 4.9% cumulative increase on the Three-Year-Old Index. MMR Retention, which is the average difference in price relative to current MMR, was greater than 100% every day but one in July and averaged 102.5% for the month. The MMR Retention trend reflected that vehicles were selling above current MMR values and was a continuation of the price trends in May and June.
On a year-over-year basis, most major market segments saw seasonally adjusted price increases in July. Luxury cars and pickup trucks outperformed the overall market, while most other major segments underperformed the overall market.
Recovering retail results for vehicle sales. According to Cox Automotive estimates, total used vehicle sales volume was down 4% year-over-year in July. We estimate the July used SAAR to be 38.0 million, down from 39.7 million last July but up from June’s 36 million rate. The July used retail SAAR estimate is 20.4 million, down from 20.8 million last year but up month-over-month from June’s 18.9 million rate.
Used vehicle prices have recovered as the supply of used vehicles has come down. Using a rolling seven-day estimate of used retail days’ supply based on vAuto data, we see that used retail supply peaked at 115 days on April 8. Normal used retail supply is about 44 days’ supply. It ended July at 34 days, so much lower than normal. We estimate that wholesale supply peaked at 149 days on April 9, when normal supply is 23. It was down to 23 days by month end.
July total new vehicle sales were down 12% year-over-year, with one more selling day compared to July 2019. The July SAAR came in at 14.5 million, a decrease from last year’s 17.0 million but up from June’s 13.1 million rate.
Combined rental, commercial, and government purchases of new vehicles were down 40% year-over-year in July. New vehicle sales into the commercial channel declined 6% year-over-year in July. Retail sales of new vehicles were down 8% year-over-year in July, leading to a retail SAAR of 13.3 million, down from 14.8 million last July but up from June’s 12.1 million rate. Fleet sales are down 43% in 2020 through July, and retail sales are down 17%, as the overall new vehicle market is down 22% so far this year.
New vehicle inventories came in around 2.5 million units.
Rental risk pricing improves. The average price for rental risk units sold at auction in July was up 7.5% year-over-year. Rental risk prices were up 5% compared to June. Average mileage for rental risk units in July (at 46,600 miles) was down 5% compared to a year ago and up 7% month-over-month.
Coronavirus uncertainty amid mixed conditions. Consumer Confidence declined 5.8% in July and left confidence down 32% year-over-year. Plans to purchase a vehicle in the next six months declined in July and is now down year-over-year. Plans to purchase a home increased. The final reading on Consumer Sentiment in July from the University of Michigan fell to 72.5 from the preliminary estimate of 73.2 mid-month. Sentiment has lost its June gains. The pending home sales index for June increased 16.6% as contracts to buy existing homes have grown strongly since April. The increase aligns with what we have been seeing in new home sales. Pending home sales are now up 6.3% year-over-year, and the index reflects the highest rate of pending sales since February 2006, which was the peak of the housing boom. An elevated number of confirmed COVID-19 cases combined with increasing unemployment threaten to stall the economic recovery, while tight supply of both new and used vehicles weighs on the auto market recovery.