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June 19, 2017
www.usedcarnews.com
Used Car Market Shows Signs of Strength
MOVING METAL: A ringman helps sell a car at a Manheim auction. Even though volumes continue to grow, steady consumer demand is helping to keep prices from dropping as much as some people have expected.
By Ted Craig
Rush - Dated Material
There are some signs the used-car market was surprisingly strong in May, although others point to continued concerns about weakness. Wholesale used vehicle prices increased 2.6 percent month-overmonth in May. This brought the Manheim Used Vehicle Value Index to 127.9, which was a record high and represented a 2.8 percent increase from a year ago. The index adjusts wholesale prices for mix, mileage, and seasonality. “The May index result challenges concerns that increasing wholesale
supplies from near peak off-lease volumes and rising rental volumes would lead to rapidly declining used car values,� said Cox Automotive Chief Economist Jonathan Smoke. “Indeed, the opposite appears to be happening. Higher commercial volumes at auction are providing the used vehicle market with quality and choice that offers a compelling value to consumers.� One indication that consumers are willing to invest in used cars comes from Edmunds. The firm reports that used-vehicle buyers put down an additional $93 on average in May, an increase of
3.8 percent compared to May of last year. “Buyers want pricier cars with more bells and whistles, leading to the troubling trend of trading longer loan terms for lower monthly payments,� said Edmunds executive director of industry analysis Jessica Caldwell. “But now that interest rates are also on the rise, something has to give.� The average loan term, monthly payment and amount financed on used vehicles showed slight dips in May, Edmunds reports. Not all indicators are positive, however.
Black Book’s Used Vehicle Retention Index fell to 112.3, down from 113.1 in April. On a 12-month basis, the index has dropped 5.6 percent. The Index is calculated using Black Book’s wholesale average value on two- to six-year-old used vehicles, as a percent of original typically equipped MSRP. “It is expected that we will see more declines in the index in the months ahead as we move deeper into the year, particularly driven by softness among car segments,� said Anil Goyal, Black Book’s senior vice president of automotive valuation.
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