Lenders have been benefitting from strong used-vehicle prices all year. Higher-than-expected prices at auction have muted losses on repossessions and off-lease vehicles. GMAC and Ford Credit, among others, cited strong used-car values as part of the reason for their improved third-quarter earnings.
But in its Used-Vehicle Value Index released today, Manheim Consulting noted a slight decline in wholesale pricing. The October reading inched down to 117.4, from a record 118.5 in September.
Is this the beginning of a steady slide? Do lenders need to brace for lower auction values heading into 2010? Or might the dip be a normal decline, like the one Manheim reported at the end of 2008?
Here’s a look at the Manheim Used-Vehicle Value Index for the past year:
At Black Book we see the peak in values for the year having been reached and for the past 6 weeks now the trending has been softening. We also see it as the fall seasonal adjustment necessary to make room for a new model year of vehicles. Nothing to be alarmed about, just part of the market. It is just that the ride has been so positive all year we are not accustomed to lower values. Still many opportunities exist in today’s used market and auction lanes. Ricky Beggs
Here’s something to consider when looking at the value of used vehicles. All used vehicles obviously start life as a new vehicle. This year, total new vehicle sales will be down 6 million+ units from 2 years ago. This means that when the economy is in full recovery 2 years from now (at least we hope it is) there will be millions less 2 to 3 year old used vehicles available to sell then there have been in past years. What will happen to the value of used vehicles when that time comes?
Ricky Beggs, as usual, is very astute in not just looking at what is happening on the surface, but more importantly, what are the underlying fundamentals that drive the market. If there was ever a time that we can feel very positive about the near and mid term outlook of a strengthening used vehicle market trewnding, it is now. Absolutely one of the bright spots in the auto industry. Ricky Beggs provides continuing analysis on the used market through the Black Book orgainization. We have relied on thier insight for over 30 years. They are “best in class”. I do not give out compliments easily. He has earned it.