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Release date: 9/13/2020
by Jonathan Smoke
Cox Automotive
Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) increased 3.64% month-over-month in August. This brought the Manheim Used Vehicle Value Index to 163.7, a 15.8% increase from a year ago and a record high for the Index.
Manheim Market Report (MMR) prices improved at a decelerating pace over the four full weeks of August, resulting in a 1.6% cumulative increase on the Three-Year-Old Index. In the last full week of August, the Three-Year-Old Index declined 0.1%, ending the streak of 16 weeks of price appreciation. MMR Retention, which is the average difference in price relative to current MMR, averaged 100.5% for the month and ended the month under 100% for four of the last five days. Likewise, the sales conversion rate declined over the course of August but remained higher than normal for this time of the year.
On a year-over-year basis, all major market segments saw seasonally adjusted price increases in August. 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 August. We estimate the August used SAAR to be 38.0 million, down from 39.7 million last August and flat compared to July. The August used retail SAAR estimate is 20.3 million, down from 20.7 million last year and slightly down month-over-month from July’s 20.4 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 August at 38 days, so lower than normal. We estimate that wholesale supply peaked at 149 days on April 9, when normal supply is 23. It was down to 24 days by month end.
August total new vehicle sales were down 19% year-over-year, with two fewer selling days compared to August 2019. The August SAAR came in at 15.2 million, a decrease from last year’s 17.1 million but up from July’s 14.6 million rate.
Combined rental, commercial, and government purchases of new vehicles were down 51% year-over-year in August. New vehicle sales into the commercial channel declined 17% year-over-year in August. Retail sales of new vehicles were down 15% year-over-year in August, leading to a retail SAAR of 14.0 million, down from 14.9 million last August but up from July’s 13.4 million rate. Fleet sales are down 44% in 2020 through August, and retail sales are down 17%, as the overall new vehicle market is down 21% 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 August was up 8.4% year-over-year. Rental risk prices were up 2% compared to July. Average mileage for rental risk units in August (at 39,500 miles) was down 17% compared to a year ago and down 15% month-over-month.
Coronavirus uncertainty amid mixed conditions. The new home sales SAAR increased 13.9% in July, which again far outperformed consensus expectations even with June’s sales revised up. The pace of new home sales is now 901,000, which is up 36.3% from a year ago and is the highest level of new home sales since 2006. New home sales are less encumbered by inventory problems and better reflect the boost to housing demand caused by historically low mortgage rates. Demand for new homes may also be boosted by growing interest in suburban, rural, and second homes. Consumer Confidence according to the Conference Board declined 7.5% in August and left confidence down 37% year-over-year. Plans to purchase a vehicle in the next six months declined in August to a 10-year low. Plans to purchase a home also fell but just to a four-month low. The data for consumer confidence was collected through Aug. 14. The final reading on Consumer Sentiment in August from the University of Michigan increased to 74.1 from the preliminary estimate of 72.8 midmonth. Sentiment recovered some of its July losses in August as daily new cases of COVID-19 trended down.