Used-Vehicle Pricing in Volatile Wholesale Market
In today’s volatile wholesale market, dealers need more information and tools for assessing used-vehicle values to sustain and drive profitability. Increasing gas prices are driving many customers away from new-car purchases and structurally changing the vehicle pricing mix. The result is a more complex trade-in environment.
Auction transaction data from August bears out this point. AuctionNet® data shows wholesale prices of large pickup trucks down 14.5 percent year-to-date, despite rising 7.7 percent in August over the June low point. Similarly, large SUV values have fallen 11.3 percent this year, despite rising 8.9 percent in August over June. By contrast, compact car values have climbed 22 percent year-to-date, and continued to grow at a more moderate 2.1 percent pace in August over June’s rate.
NADA Used Car Guide’s revised estimates show that for every $1 increase in gas prices, large pickups decline in value by $2,700, on average. On the other hand, for intermediate compact cars, a $1 increase in fuel costs lifts resale prices by an estimated $1,000.
For dealers, projecting inventory requirements and assessing
used-vehicle pricing trends in this environment present new challenges that
call for a close look at the market data. To help dealers better define
pricing for a broader spectrum of vehicles and access true auction prices
quickly and conveniently, NADA Used Car Guide has introduced new and
enhanced products.
All-New Value Categories for Electronic
and Print Products
New "Rough Trade-In" and "Average Trade-In"
values are now included in all NADA Used Car Guide electronic products, and
will be part of the printed guidebook in October. These new values
complement the existing “Clean Trade-In,” "Clean Loan," and
"Clean Retail" values and provide a more complete picture for dealers of
pricing based on vehicle condition.
In practice, the majority of vehicles - about 50 percent - fall into the "Average" condition category, according to NADA market data. Vehicles in the "Clean" category represent 15 percent of the market, while those in the "Rough" category - usually considerably damaged, but not "Salvage" vehicles - are about 20 percent of the total. The remaining vehicles fall into the "Extra Clean" or "Salvage" unit category.
As illustrated below, NADA’s “Clean” Trade-In values often carry a premium over the AuctionNet® average price. The new “Average” Trade-In value will be closer to the AuctionNet average price, while “Rough” Trade-In will often be lower than the AuctionNet average price.
In addition, by adding in actual auction data as a reference point,
dealers can also get a good reading of how the wholesale market is reacting
at any point in time.
Real Auction Sales Data with
AuctionNet Market Report and SmartBid
Two newly launched NADA
Used Car Guide products - AuctionNet Market Report and SmartBid - provide
actual, timely auction data in online and portable formats. These products
help dealers monitor the volatility of the market and make smart purchasing
and selling decisions. They provide access to real auction sales data from
AuctionNet, including transactions from all Manheim and ADESA auctions, as
well as participating ServNet, ABC, and independent events. That’s
about 80 percent of all transactions going through auctions.
AuctionNet Market Report, produced in partnership with the National Auto Auction Association, gives dealers 24/7 online access to the most recent eight weeks of auction transactions. It offers a comprehensive summary report, with searchable access to approximately 1.2 million records. The report includes price and mileage ranges and specific, true auction transactions by sale week.
SmartBid provides the convenience of portability by delivering AuctionNet data right to a dealer’s Palm, with a variety of search tools allowing decoding by VIN or searching by make/model, and sorting by price, mileage, sales type, or date.
These products help dealers know the dynamics of the auction market
better - the low points and the high points. That can make the difference
between profit or loss when it comes to buying a car for resale.
Eye to the Future
NADA’s editors believe
that as long as gas prices remain volatile and above the $3.40 level, the
price of gas will heavily influence the used-car market for the next 12 to
18 months. Only when the new threshold of acceptable gas prices is
established, and the model mix of new cars and the used supplyreflect the
current demand framework, will the used market return to the fundamentals
that have historically driven resale prices. In the meantime, dealers need
to continue to closely monitor the market using the best information and
tools available to them to stay on top of the latest developments.
To learn more about all of NADA Used Car Guide’s vehicle value categories, as well as its full lineup of electronic and print products and services, visit www.nada.com/b2b.