Wednesday, October 07, 2009

9th Monthly Increase in Used Vehicle Price Index

Wholesale used vehicle prices (on a mix, mileage and seasonally-adjusted basis) rose 1.8% in September. This brought the Manheim Used Vehicle Value Index to a record high of 118.5, representing a 6.9% increase from a year ago. Adjusted wholesale prices have now risen for nine consecutive months (see chart above).

The supply/demand dynamic that has pushed used vehicle values higher is a multiple-year, not a multiple-month, trend. Nevertheless, wholesale prices appear to be reaching a plateau. In particular, the last week of September saw an easing in prices that was greater than the normal seasonal pattern.

From a previous Manheim Consulting report:

Some analysts have suggested that the rapid rise in wholesale used vehicle pricing is a precursor to an improvement in new vehicle sales and may even point to a recovery in the overall economy.

MP: The 2.1 point September increase in the Manheim Used Vehicle Value Index marks the 9th consecutive monthly increase (every month this year), following decreases in 10 out of the previous 14 months (from October 2007 to December 2008). The year-to-year increases in May (1.5%), June (5.8%), July (5%), August (5.1%) and September (6.95%, highest increases since Dec. 2005) for the index follow 17 consecutive months of consecutive year-to-year decreases (Nov. 2007 to April 2009). Further, the September 2009 reading of 118.5 represents an all-time record high for the index (back to 1995), and is now higher than the pre-recession level.

Certainly, the Cash-for-Clunker factor might have created a temporary upward bias in the used vehicle index over the last couple months, but there was already a strong upward trend in place, and the 20.5 point 9-month increase from December-September could reflect the momentum of an economic recovery.


At 10/07/2009 9:14 AM, Anonymous Anonymous said...

How have used parts prices changed? With people not buying new cars, and with cash for clunkers removing cars (and their parts) from the market, one would expect a price response. Is it demand for a cheaper auto, or a shortage of used cars? Do we have numbers on the supply of used cars (and parts). Used car prices constrain new car prices at the margin, so as used car prices increase, new car sales should be responsive.


At 10/07/2009 9:57 AM, Anonymous Pfurr said...

Might? Ya think?

Bill and I found something to agree on.

At 10/07/2009 11:30 AM, Anonymous Anonymous said...

NOte that Cash for Clunkers only really removed engines from the parts market, most of the rest of the parts are salvagable and will be re-used.

At 10/07/2009 11:45 AM, Anonymous Anonymous said...

Auto markets are also dynamic, in that used car volume (supply) increases with new car purchases, as consumers sell their old car in trade for a new car. So, the supply of used cars may be low because the sale of new cars was low.

At 10/07/2009 1:01 PM, Anonymous Prologue said...

Manheim says as much if you actually read their reports, month to month.

The decrease in trade ins from lower new car sales, people keeping their old cars longer, higher demand for used cars from lower incomes, and tight (almost nonexistent) financing for used car loans has ratcheted up used car prices. This is a harbinger of problems, not recovery.

At 10/07/2009 2:32 PM, Anonymous Anonymous said...

As the author of the first and third anonymous comment, I agree with Prologue.

I would be interested in data on used parts prices and the age of cars on the road as this may be indicative of people holding onto their older cars.

If old car prices increase because of the clunkers program, this may put a floor on new car prices. Also, used cars are not interchangeable with each other--a used 5 year old car is not the same as a used 2 year old car--so to the extent there have been fewer fleet purchases and leases, which will also mean fewer used cars, that will also put a floor on used, and ultimately new, car prices, everything else being equal.



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