RVI: December Shows Early Used Price Uptick; Slowdown Likely for 2011, Beyond

Based on early indications, used-vehicle prices continued to be robust during the first few weeks of December, which appeared to be “another strong month, although leveling off a bit,” according to RVI Group vice president Rene Abdalah.

Looking at the first three weeks of December, there was a 0.5-percent month-over-month increase in used-vehicle prices, Abdalah told Auto Remarketing on Monday.

This follows a 2-percent sequential hike in used-vehicle pricing during November, when values jumped 16.4-percent on a year-over-year basis, according to RVI.

More specifically, the RVI Used Car Price Index was at 1.297 for November.

Through November, there had been used price gains in each month of the year, RVI noted. In November — like the rest of the year — the key reasons for the strength were “solid new-vehicle prices” and “low (used) supply levels,” Abdalah said.

Looking at individual segments in November, all but one of the vehicle categories included in RVI’s analysis (small pickups, down 1.9 percent) showed sequential improvement. All segments climbed on a year-over-year basis.

Looking ahead at the current year, though, 2011 is likely to show used-vehicle prices weakening compared to where they stood in November.

Specifically, the RVI Used Car Price Index for full-year 2011 is expected to be 1.279. While this is up 5 percent from the projected full-year 2010 index, it is down 1.4 percent from November 2010.

The reason for the decline will be the fact that new-car prices are expected to dip because automakers are looking to bolster new-vehicle sales and “the only way they’re going to do that is through softening new-car prices.”

The company noted that “competitive pressures” are expected to move upward, as well.

In fact, the RVI Competitive Index is likely to show a 2.6-percent year-over-year jump in 2011,

Explaining how this affects used pricing, Abdalah noted that the greater the competitive index, the softer new-vehicle prices become.

While prices on the new side were projected to climb 1.8 percent for full-year 2010, the RVI New Car Price Index is predicted to drop 0.4 percent in 2011 compared with 2010. And with softer new-vehicle prices, there is more pressure on used-vehicle prices.

So, it means that “the higher the competition, the more downward pressure on used-car prices,” he shared.

Compact vehicles, in particular, are expected to be affected significantly by more competition, as the competitive index for this segment is likely to climb 7.4 percent year-over-year in 2011, compared with the 2.6-percent hike forecasted for the overall industry, Abdalah noted.