CARY, N.C. –
Wholesale-price increases accelerated as June and likely the most tumultuous second quarter in anyone’s memory neared an end.
How long the fuel for that wholesale-price climb will last is almost as challenging to project as when the coronavirus pandemic will stop influencing the auction and dealership worlds.
Black Book, Cox Automotive and J.D. Power Valuation Services all shared how wholesale prices have increased in recent days, while Black Book reiterated its longer-term pricing forecast, too.
According to its latest COVID-19 Market Update released on Tuesday, Black Book indicated its volume-weighted data showed overall car segment values increased 1.91% this past week.
In fact, all car segments experienced increases, with the most notable jumped connected with summertime rides as the sporty car segment posted a gain of 2.45%. Analysts also noted the prestige luxury car segment was the only segment to have an increase of less than 1.0% this past week.
“However, it is still notable as this is a segment that rarely increases,” Black Book said in its report.
Meanwhile, Black Book’s volume-weighted data showed values in the overall truck segment — including pickups, SUVs and vans — increased by 1.15% last week with all segments rising except full-size vans.
Analysts mentioned the sub-compact crossover and sub-compact luxury crossover segments led the increases in the truck space at 2.53% and 2.52%, respectively.
“These segments have been slower to rebound compared to the larger compact crossover segment,” Black Book said.
Over at Cox Automotive, chief economist Jonathan Smoke touched on wholesale prices in Tuesday’s COVID-19 Auto Market Update video.
“Used-vehicle values keep rising,” Smoke said. “Average model-year 2017 wholesale prices increased 1.7% last week, and retail prices increased 0.6%. As of this weekend, wholesale prices are up 5.1% from the beginning of the year and 2.1% from the prior peak in Week 11, while retail prices are up 0.5% for the year.”
And J.D. Power Valuation Services senior director Larry Dixon sent a message to Auto Remarketing on Wednesday, recapping what wholesale-price movements that firm is seeing.
Dixon indicated wholesale prices have improved 22 percentage points during the past 10 weeks and are now 7% higher than at the beginning of March.
“Wholesale prices are exceptionally strong at the moment and the consistent growth week to week provides no indication that prices will fall materially near-term,” Dixon said. “The robust pace of retail sales since the end of May also supports a positive outlook, as dealer demand for replacement inventory remains high.”
Black Book included both a short-term outlook for wholesale prices, considering the rest of the summer and into fall, as well as long-term projections for 36-month residual values and where they might land by the summer and fall of 2023. Those forecasts are viewed through the prism of the most likely economic scenario as well as a more severe situation.
“We project a drop in wholesale prices compared to a pre-COVID-19 baseline this summer/fall, as the U.S economy suffers through the effects of COVID-19,” Black Book said in connection with the most likely scenario. “We anticipate that later this summer and fall, the wholesale prices will be between 10% and 15% lower than originally projected before the pandemic, due to a glut in supply and much weaker demand.
“Prices will start to recover in 2021 as the economy becomes stronger. We also anticipate that older (6-year-old), cheaper vehicles in average condition will not decline as much due to increased demand for these units,” analysts continued.
Under a severe recession scenario, Black Book analysts added, “We project a drop in wholesale prices of more than 20% later in the summer and fall, compared to a pre-COVID-19 baseline, with a slow recovery in 2021. The effects of the pandemic and recession will still be impactful in 36 months, and we project a 10% market level decline of wholesale prices as compared to pre-COVID-19 projections for the second half of 2023.”
Senior editor Joe Overby contributed to this report.