BLACK BOOK – Wholesale Prices, Week Ending September 18th

Traditionally, as we move past Labor Day, values begin to decline, with the largest portion of the yearly depreciation typically occurring in the fourth quarter. However, that is not the case this year, we’ve now had four consecutive weeks of overall market increases in wholesale values. With new inventory not expected to improve until later into 2022, wholesale prices are anticipated to remain at elevated levels for the foreseeable future.

                                           This Week      Last Week        2017-2019 Average (Same Week)

Car segments                        +0.43%            +0.31%              -0.25%

Truck & SUV segments       +0.36%            +0.09%              -0.12%

Market                                 +0.38%           +0.17%             -0.17%

Car Segments

• On a volume-weighted basis, the overall Car segment increased +0.43%. For reference, the previous week, cars increased by +0.31%.

• Six of the nine car segments reported gains last week, with Mid-Size Car (+0.81%) having the largest increase.

• Sporty Car (-0.47%), Premium Sporty Car (-0.07%), and Prestige Luxury Car (-0.02%) were the only Car segments to report declines.

• Compact Car (+0.73%) has now increased for five weeks in a row, for an average weekly gain of +0.43%.

Truck / SUV Segments

• The volume-weighted, overall Truck segment increased +0.36%, compared to last week’s increase of +0.09%.

• Sub-Compact (+0.92%) and Compact (+0.75%) Crossovers reported the largest gains.

• Only one segment experienced declines, the Full-Size Luxury Crossover/SUVs, which dropped by -0.10%.

• Full-Size Vans (+0.43%) are a standout segment with 33 of the last 34 weeks reporting increases for an average weekly change of +0.54%.

Weekly Wholesale Index

Calendar year 2020 ended with used wholesale prices at elevated levels. With economic patterns (including the automotive market) driven by the pandemic, normal seasonal patterns (e.g., 2019 calendar year) in the wholesale market were not observed for most of the year. We saw a similar picture in 2009, at the end of the Great Recession. Calendar year 2021 has not had typical seasonality patterns as the market has had rapid increases in wholesale values for the majority of the year. After reaching record heights at the end of June, wholesale prices began to decline at a rate higher than the typical seasonal decline through July and most of August. As we moved into the Fall season, wholesale prices began to show a positive movement once again.

The graph below looks at trends in wholesale prices of 2-6-year-old vehicles, indexed to the first week of the year. 

Retail (Used and New) Insights

• Rivian’s first battery-electric pickup, the R1T, ready for customer delivery, rolled off the assembly line last week. Their second model, an SUV called R1S, is slated to start production in the fall.

• CARFAX is estimating that more than 200,000 vehicles are potentially damaged because of the flooding from Hurricane Ida that dumped massive amounts of rain on Louisiana and the Northeast.

• GM still does not have a fix for their roughly 140,000 recalled Bolt EVs. The issue is the result of a defect in the batteries from supplier LG Corp. GM has now advised owners to park their car at least 50 feet away from other cars to reduce the risk of the battery overheating and starting a fire.

• The all-electric sedan, Lucid Air, received an EPA rating of 520 miles, beating the Tesla Model S Long Range. The 500+ range will only be available on the Dream Edition trim that has 933 horsepower and will have an MSRP just below $170,000. Production is set to start later next year.

Used Retail Prices

With the proliferation of ‘no-haggle pricing’ for used-vehicle retailing, asking prices accurately measure trends in the retail space. Retail demand slowed down at the end of last year, and thus resulted in declining retail asking prices for the last several weeks of 2020. As demand rebounded, retail prices have lagged slightly behind wholesale prices, but March had an accelerated growth in retail prices. In April and May, retail prices picked up speed as demand accelerated, fueled by stimulus payments, tax season, and shortages of new inventory. In June, retail prices continued to rise. After strong Spring and Summer months, retail listing prices seemed to stabilize at around 25% above where we started the year.

This analysis is based on approximately two million vehicles listed for sale on US dealer lots. The graph below looks at 2-6-year-old vehicles.

Inventory

Used Retail

Current used retail listing volume is about 15% below the start of the year. Used inventory is now starting to decrease again due to a slowdown of trade-ins and lease returns.

Days-to-turn for used retail listings have been increasing, as retail demand softened over the last few weeks. The days-to-turn now sits just above 34 days, which is still lower than what is typically expected in a normal year.

Wholesale

Sales rates and values at the auctions remain strong as the market continues to face low new inventory levels as well as limited availability of used vehicles. With fewer new vehicles available, dealers are receiving less trade-ins and lease returns, so they are looking for other avenues to stock their lots. The auction has always been a popular choice for used inventory sourcing, but the volume offered for sale is low and quality vehicles are hard to find.

Newer used units are seeing considerable strength as they provide dealers with new car substitutes for their customers. The overall wholesale market for 2-8-year-old vehicles increased by +0.38% last week, but 0-2-year-old increased +0.51%.