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September 2018 Kontos Kommentary

Current Used Vehicle Market Conditions and Outlook


Summary

As the wholesale used vehicle market enters the period of time comparable with last year’s hurricane season, wholesale prices will be challenged to meet last year’s high, demand-driven levels. This is reflected in average wholesale prices in September, which fell on both a month-over-month and year-over-year basis, and significantly lower retail used vehicle sales than last year.

Prices for off-lease units remained strong, however, as upstream remarketing continues to deny volume from physical auctions and causes dealers unable or unwilling to participate in online-only auctions to bid aggressively on the remaining downstream units.


Details

According to ADESA Analytical Services’ monthly analysis of Wholesale Used Vehicle Prices by Vehicle Model Class, wholesale used vehicle prices in September averaged $10,981 – down 0.6% compared to August and down 0.6% relative to September 2017. Prices for the truck model class segments, on average, fell at a similar rate as car prices, supporting our theory that the two groups will tend to move in parity as truck supply outpaces car supply.

When holding constant for sale type, model-year age, mileage, and model class segment, prices were up significantly on a year-over-year basis for both midsize cars and midsize SUV/CUVs, as seen in the following table:

 

 

Midsize car prices continue to outperform prices for midsize SUVs and crossovers, due, as mentioned above, to the incoming supply of trucks outpacing that of cars. The strength of prices for both groups in this analysis indicates, again as mentioned above, that upstream sales are preventing an oversupply of off-lease units from reaching physical auction lots.

Average wholesale prices for used vehicles remarketed by manufacturers were down 1.9% month-over-month and up 0.7% year-over-year. Prices for fleet/lease consignors were down 1.3% sequentially and up 6.6% annually. Average prices for dealer consignors were down 0.4% versus August and down 0.3% relative to September 2017.

Based on NADA data, retail used vehicle sales by franchised dealers were down 6.3% year-over-year in September, and were down 8.7% for independent dealers. September CPO sales were down 8.9% from the prior month and down 3.9% year-over-year, according to figures from Autodata. On a year-to-date basis, CPO sales remain up 1.8% versus last year.

 

1 The analysis is based on over six million annual sales transactions from over 150 of the largest U.S. wholesale auto auctions, including those of ADESA as well as other auction companies. ADESA Analytical Services segregates these transactions to study trends by vehicle model class.

The views and analysis provided herein relate to the vehicle remarketing industry as a whole and may not relate directly to KAR Auction Services, Inc. The views and analysis are not the views of KAR Auction Services, its management or its subsidiaries; and their accuracy is not warranted. The statements contained in this report and statements that the company may make orally in connection with this report that are not historical facts are forward-looking statements. Words such as “should,” “may,” “will,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “bode”, “promises”, “likely to” and similar expressions identify forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected, expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include those matters disclosed in the company’s Securities and Exchange Commission filings. The company does not undertake any obligation to update any forward-looking statements.

Wholesale Price Data by Model Class Segment - September 2018
Wholesale Price Data by Model Class Segment History 2015-092018
Wholesale Price Data by Model Class Segment - Full History 2011 - 012016
ADESA Analytical Services Selected Model Class Segments
Wholesale Price Data by Model Class Segment - Full History 2000 - June 2012

Kontos Kommentary - September 2018