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August 15, 2016
www.usedcarnews.com
Used Car Market Sends Mixed Signals
Photo by Jeffrey Bellant GOOD QUARTER: Manheim economist Tom Webb shares his views on the market and the economy in general at the recent National Independent Automobile Dealers Association convention.
As with much of the rest of the economy, the used-car industry sent mixed signals in the second quarter, which now raises questions for the rest of the year. Penske Automotive Group Inc. best reflected the market in its second-quarter results. Used unit retail sales rose 6.8 percent, but same-store used unit retail sales declined 2.6 percent. Same-store used retail revenue rose 0.2 percent. Average transaction price per unit was $27,936, up 0.2 percent, but average gross profit per used unit was $1,697, down $85 per unit. Overall, the seven public dealer
groups ended their streak of 27 consecutive quarters of same-store retail used unit sales gains, reports Manheim chief economist Tom Webb. Webb attributed that slide, in part, to their inability to sell many recalled units. Repairs on those units should speed up in the third quarter, Webb said, putting them back in the market. The Manheim Used Vehicle Value Index rose throughout the second quarter and rose yet again in July. It now stands at 127, up from 122.5 in March. The Index adjusts for mix, mile-
age and seasonality. Other measures of the wholesale market have shown more downward movement in the last few months, but have been stronger than many predicted. “Although there was a near-universal expectation that wholesale prices would suffer in 2016 due to growing wholesale supplies, current auction values are not abnormal relative to several long-term historic relationships,� Webb said. Ford Motor Credit Co. was one consignor that warned about residual performance during its recent second-quarter conference call. And the potential for lower wholesale prices going forward is creat-
ing some concerns for the finance market. BB&T Corp. reported that it increased credit loss allocations due to higher net charge-offs at its Regional Acceptance subsidiary. This move was driven by portfolio mix and an increase in loss severity. Fitch Ratings expects losses to increase for more subprime creditors due to weaker collateral credit quality and pressure on wholesale vehicle values, which will pressure recovery rates. The good news, Fitch reports, is that delinquencies and losses on prime auto loan ABS remained historically low through June.
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