Wholesale Prices, Week Ending March 20th

The market continues to see consistent week-over-week growth in wholesale values, as the additional round of stimulus spurred retail demand and sent dealers to the auctions to source replacement inventory from a market that was already tight on supply.

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

Car segments                      +1.42%       +1.12%               +0.20%

Truck & SUV segments     +0.82%       +0.99%               -0.17%

Market                                +1.03%       +1.04%               -0.01%

Car Segments

• Car segments had another week of large gains with the overall rate of increase rising to +1.42%, compared to +1.12% the previous week.

• All nine Car segments had gains exceeding +0.50% and five of those exceeded +1.00%.

• Compact Cars, a segment in high demand due to the vehicles in this segment being in a price point that is good for tax season (and stimulus check) buying, nearly set a record at +2.23%. This level of increase hasn’t been seen since the week of June 19th, when the increase was +2.29%.

• Premium Sporty Cars had the lowest increase (+0.61%) this past week, but it was still higher than the prior week (+0.52%).

• Truck segments continued to climb (+0.82%) with the rate of increase declining slightly compared to the prior week at 0.99%.

• Full-Size Trucks (+1.04%), for the second week in a row,  had an increase exceeding +1.00%.

• The mainstream and luxury Sub-Compact Crossover segments both had large levels of increases at +1.78%, exceeding the previous week’s performance. For the mainstream Sub-Compact Crossover segment, this marked the fourth week in a row of weekly gains exceeding +1.00%.

• Small Pickup (+1.31%) and Minivan (+1.26%) also had consecutive weeks of values increasing greater than 1% in a single week.

Newer Used Vehicles (0-2-year-old)

Driven by an extreme shortage of rental returns and limited inventory of new vehicles, the price trends of newer used vehicles have started to diverge from older units. The table below shows the average weekly price changes for 0-2-year-old vehicles.

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

Car segments                      +1.49%       +1.49%               +0.20%

Truck & SUV segments     +1.14%       +1.32%                -0.16%

Market                                +1.24%       +1.37%                -0.06%

Weekly Wholesale Index

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. It appears that 2021 will not have typical seasonality patterns. So far, the spring market arrived about 7 weeks earlier and with much stronger price increases compared to a typical pre-COVID year. 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

• With the release of the additional round of stimulus payments getting into consumers’ bank accounts this past week, dealers reported an increase in activity on their new and used lots. Additionally, BHPH dealers are reporting that some customers are using this money to pay-off their existing loans.

• Production issues continue to plague the OEMs. Honda and Toyota both announced new cuts in production last week. This time it wasn’t the global microchip shortage causing the delays, but instead it was cited as being due to “a shortage of petrochemicals”. As for the continued effects of the global microchip shortage, Volvo released a statement regarding the impact on their production and concerns for the situation getting worse in Q2.

• BMW announced their plans for an electrified future, and they are more conservative than some of their competitors, with the goal of having half of their sales coming from electric vehicles by 2030.

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 leading up to the December holidays, and thus resulted in declining retail asking prices over the last several weeks of 2020. As demand rebounded in January, retail prices seemed to lag wholesale prices – retail asking prices continued to decline throughout January and remained stable in February. March is showing growth in retail prices (index jumped by about one point last week), but the rate of growth is still lower compared to the increases of wholesale prices. 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 (similar to our wholesale price index).

Volume

Used Retail

Used retail listing volume stayed essentially flat since the beginning of the year, but remains at levels above where the industry was in January, during the pre-COVID time of 2019.

Days-to-turn have been increasing since November and is approaching historic average level. Recently, the trend is starting to show signs of reversing as retail demand picks up across the country as a result of tax returns and the additional round of $1,400 stimulus checks being deposited into consumers’ bank accounts.

Wholesale

• Auction sales rates, as a percentage of total offered for sale, continue to grow, with the only no-sales being the result of sellers’ unwillingness to budge on their desired pricing and buyers being hesitant due to current retail price levels.

• With the release of the newest round of federal stimulus into consumers’ bank accounts and the increase in demand it spurred on dealer lots, the expectation is that used demand will continue to be strong as those dealers look to replenish their inventory after a strong week of retail sales. With this knowledge, remarketers are continuing to push their floors higher each week.

• Supply continues to be constricted as there is a reduction in rental units returning to the market, as well as trade-ins being kept by dealers and lease turn-ins being held by the grounding dealer instead of being sent to auction.