Atlanta, Georgia -- January 10, 2018 -- Used vehicles prices have softened in the wake fierce hurricane season. The Manheim Used Vehicle Value Index—which accounts for wholesale pieces adjusted for mix, mileage and season—came to a reading of 132.0 last December. While a 5.6 pointover last year, is also marks the lowest levels seen since August.
"Most gains since August were a result of the replacement demand following the devastation of Hurricanes Harvey and Irma," says Cox Automotive's chief economist. "Values are returning to pre-storm levels. Underlying vehicle depreciation rates have been accelerating to catch up to where prices would have been without the abnormal demand and scarce supply in both September and October."
Also down were new-car sales, dropping 5 percent relative to this time last year. With 17.1 million cars bought in 2017 -- are down 300 thousand sales from last year, marking the first such decline in seven years.
December's seasonally adjusted annual rate (SAAR)—down from a record 18.1 million in 2016—rounded out at 17.8 million, the fourth straight month of over 17 million SAAR. While trucks and SUVs saw gains, cars continued to see a sharp decline December were down 17 percent from to last year.
Cox Automotive estimates used car sales increased by 4 percent year-over-year in December, with the month's used-car SAAR having increased to 38.9 million units. At 39 million units for last year, used-vehicle sales grew by 1 percent compared to 2016.
Used vehicle pricing trends, all car segments - except for midsize cars - were up from last year, with especially strong increases once again in pickups and vans.
Quarterly compact prices, coming off a strong third quarter, saw only a modest increase of 2.9 percent over to last year.
Midsize Cars remained the weakest segment for the second quarter running and experienced the only decline, 0.7 percent.
Pickups and Vans continued to gain steam, with pickups seeing the highest sales increases of all vehicle classes, at 10.4 percent over last December, and vans close behind at 9.9 percent.
SUVs and CUVs remained steady last quarter and experienced an increase of 5.8 percent from last December.
Luxury Car values underperformed, increasing 5.3 percent over the same period last year.
Rental risk pricing also weakened in December, with the average price for rental risk units sold at auction last month up 0.3 percent over 2016. Rental risk prices were down 2 percent compared to November, and the average mileage for these units at the end of 2017 was 49,700 miles – 15 percent higher than a year ago.
The year ahead, according The Manheim Used Vehicle Value Index:
A strong stock market, high consumer confidence and low unemployment are major factors for continued economic growth in 2018. The heightened increases in households' take-home pay should reinforce consumer spending and help offset the impact of higher interest rates on vehicle loans.
Cox forecasts expects all vehicle sales in 2018 to be flat relative to 2017 at approximately 56.2 million. New car sales this year are expected to reah 16.7 million , down from 17.1 million. Used car sales forecast should reach 39.5 million, up from 2017. Used vehicle value pricing overall in 2018 will look like last year, minus the hurricanes. A weak first quarter is predicted, followed by strong second and third quarters.
"Expect pricing weakness for the next few months thanks to depreciation accelerating for most vehicles playing catch up with the abnormal pricing performance in September and October," said Smoke. "As we look ahead into March, we will likely miss the typical 'bounce' in used-vehicle prices as tax refunds will again be delayed as part of the IRS' effort to combat identity fraud but prices should be on firmer footing by April as retail demand kicks into gear."
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