Wholesale used-vehicle prices increased 4.9%, bringing the Manheim Used Vehicle Value Index up to 134.2. However, this year-over-year change is the lowest percentage seen since August 2017, Jonathan Smoke, chief economist of Cox Automotive and compiler of the Manheim Index, told Auto Finance News.
Meanwhile, used-vehicle sales volume decreased 1% year over year, but the annualized pace of used-vehicle sales was up 1% compared with last year.
“Retail used-vehicle sales appear to have peaked, as we’ve seen a steady annualized level of sales of 39.4 million to 39.5 million every month for the past six months,” Smoke told AFN. “We’re seeing underlying demand and supply pressures coming together to limit the market’s growth.”
On the demand side, the principal issue is credit-related, as higher interest rates and tighter credit are limiting what consumers can afford to finance. As for supply, the wholesale market is also peaking. Fewer new-vehicle sales produce fewer trades; off-lease vehicles are growing more slowly; and other sources of used vehicles are stable or in decline. New-vehicle inventories came in under 4 million units for the first time in three months. In fact, inventories are at their lowest levels since January.
“Tighter supply is helping keep used-vehicle values strong,” Smoke added, “but the comparison to last year’s surge in demand in the spring and summer will start to become more challenging as 2018 progresses.”
Moving forward, Smoke advises industry professionals to pay attention to interest rates and average payments — as the Fed will likely announce another short-term rate policy increase on Wednesday, and the market will be looking for any new messages about the likelihood of more than one more rate increase this year.
“If the language indicates that two more increases are likely, rates will likely continue the move-up we’ve been seeing so far this year,” Smoke said. “If, instead, we hear a more measured tone hinting to just one more increase, we will likely see stability in auto loan rates for the rest of spring and summer.”
Cox Automotive estimates also discovered May new-vehicle sales increased 5% year over year, sparked by one more selling day compared with May 2017. Moreover, the SAAR experienced a decline as new-car sales fell 9% compared with last year, but light trucks outperformed cars in May and were up 14% year over year.
The May SAAR came in at 16.8 million, representing an increase from last year’s 16.7 million — but breaking an eight-month streak of new SAAR coming in at or above 17.0 million, the analysis notes.
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