As the impact of the COVID-19 pandemic continues to spread, vehicle auction companies are still determining how the virus will affect auction values in March and in the long term. However, companies such as Manheim and National Powersport Auctions are limiting physical auctions in favor of digital bidding.
Prior to pandemic’s impact on the stock market and economy, auction values were “strong” in February, a spokesman for Manheim told Auto Finance News. The Manheim Used Vehicle Value Index rose 6.2% year over year to a record high of 143.5.
Used-vehicle demand continued to be strong in the first half of March, according to Jonathan Smoke, chief economist at Cox Automotive. While Manheim did not have firm numbers to share, wholesale used-vehicle prices increased during the first 15 days of March, Smoke noted on Twitter.
Volume-weighted, overall car segment values increased by 0.32% this past week, the “largest single week increase we’ve seen in the last couple of years,” according to the Black Book Market Insights report.
The strong sales and retention rates were driven by an increased dealer audience as several companies are moving to simulcast auctions in order to limit the spread of the virus. Additionally, Black Book is seeing a demand for vehicles priced under $10,000.
“With the way the things are changing in the U.S. right now, it is hard to forecast what the last two weeks of March may bring,” the Manheim spokesman said. “All auctions moved online starting yesterday. That may impact the wholesale price number in some way — something the team will have to factor in.”
National Powersport Auctions echoed Manheim’s statement that it is too early to tell how future auction values will swing. Consumer demand for powersports vehicles is typically strong during the spring, but if that demand is soft then there will be “some degree of pickup in pricing,” Jim Woodruff, chief executive of NPA, told AFN.
“I would expect any market dips to be short-lived and for things to bounce back fairly quickly once life starts returning to normal,” Woodruff continued. “This is a health crisis, not a financial crisis. We might even see an echo effect where a temporary over-correction occurs, like we saw in pricing in 2012 as consumers jumped back into powersports coming out of the financial crisis.”
In the long term, “the expectation is that there will be a supply chain impact on new cars and an affordability problem for new sales, so dealers are preparing for an increase in demand for affordable, quality used units,” according to Black Book. “However, unlike previous downturns in the economy, the unknown is the impact of social distancing on consumer buying behavior.”
From an operations standpoint, Manheim, NPA and Adesa are shuttering physical auctions in favor of digital-only bidding. Manheim expects that more than 50% of its auction sales will come from simulcast buyers and sellers, Zach Hallowell, vice president of Manheim Digital Marketplace, told AFN
While all NPA facilities are open and operational, and its regular live auction schedule remains in effect, all bidding is online. However, dealers are still able to preview inventory in person. The powersports auction company already has almost 90% online bidder participation, so the transition to 100% will be straightforward, Woodruff said.