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Release date: 7/8/2020
Record-Setting Rebound in Wholesale Prices
by Jonathan Smoke
Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) increased 8.95% month-over-month in June. This brought the Manheim Used Vehicle Value Index to 149.3, a 6.3% increase from a year ago and a new record-high for the Index.
Manheim Market Report (MMR) prices improved over the four full weeks of June, resulting in a 7.1% 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 in June and averaged 102.4% 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 a reversal of what happened in late March and April.
On a year-over-year basis, most major market segments saw seasonally adjusted price increases in June. Luxury cars 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 12% year-over-year in June. We estimate the June used SAAR to be 36.0 million, down from 39.8 million last June but up from May’s 32 million rate. The June used retail SAAR estimate is 18.9 million, down from 21.0 million last year but up month-over-month from May’s 16.7 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 June at 31 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 25 days by month end.
June total new vehicle sales were down 27% year-over-year, with one less selling day compared to June 2019. The June SAAR came in at 13.0 million, a decrease from last year’s 17.2 million but up from May’s 12.3 million rate.
Combined rental, commercial, and government purchases of new vehicles were down 69% year-over-year in June. New vehicle sales into the rental channel fell 95% year-over-year in June. Retail sales of new vehicles were down 17% year-over-year in June, leading to a retail SAAR of 12.0 million, down from 14.0 million last June but up from May’s 11.8 million rate. Fleet sales are down 44% in 2020 through June, and retail sales are down 19%, as the overall new vehicle market is down 23% so far this year.
New vehicle inventories came in under 2.6 million units.
Rental risk pricing improves. The average price for rental risk units sold at auction in June was up 3.4% year-over-year. Rental risk prices were up 8.9% compared to May. Average mileage for rental risk units in June (at 43,500 miles) was down 7% compared to a year ago and down 6% month-over-month.
Coronavirus uncertainty amid mixed conditions. Consumer Confidence in June increased 14.2% and left confidence down 21% year-over-year. Plans to purchase a vehicle in the next 6 months improved slightly in June but remain slightly below June last year. The trend in consumer confidence appears much more positive than what we have been tracking in the daily index of consumer sentiment from Morning Consult, but the key difference may be that the Conference Board’s survey collection ended June 18. The Morning Consult index declined in eight of the last 12 days of June and ended June down slightly compared to the end of May. The decline in sentiment at month-end coincided with the rise in COVID-19 cases, which set new records for daily volumes. June saw continued recovery in vehicle sales as well as jobs, as a record 4.8 million jobs were added as more businesses began to open up. However, we ended June with more than 19 million still on unemployment benefits as enhanced benefits are set to expire before the end of July. Growing cases of COVID-19 threaten to stall the economic recovery, while tight supply of both new and used vehicles also weighs on the auto market recovery.