Kontos: Wholesale Prices Continued Stabilization in December

ADESA’s Tom Kontos delivered encouraging news this week to dealers scouring for affordable inventory. Kontos indicated that December became the second month in a row when average wholesale used-vehicle prices stayed relatively flat on a month-over-month basis.

Furthermore, Kontos noted the December reading meant prices fell on a year-over-year basis for the first time in 20 months.

“Nevertheless, continued strength in used-vehicle demand and tight used-vehicle supply should keep wholesale prices at relatively high levels,” Kontos cautioned in his monthly commentary.

“Moreover, prices may firm modestly during the usually strong spring/tax-season market — a scenario that looks more probable in light of the improvement in new- and used-vehicle sales during December,” he continued.

According to ADESA Analytical Services’ monthly analysis of wholesale used-vehicle prices by model class, Kontos explained December wholesale prices averaged $9,810. That amount was down 0.1 percent from November and down 1.4 percent versus the prior year.

Interestingly, Kontos pointed out prices for both compact cars and full-size SUVs were up significantly for the month in the face of rising gas prices. Compact cars moved 1.6 percent higher on a month-over-month comparison, while full-size SUVs climbed 3.4 percent.

“This could be an indication that dealers need to stock their lots with a mind toward both fuel efficiency and utility,” Kontos speculated.

“Going forward, gas prices will continue to be an area worth monitoring in terms of their potential differential impact on demand and wholesale prices for various vehicles and model classes based on their relative fuel economy,” he added.

Moving on, Kontos revealed that manufacturers registered a 3.8-percent month-over-month price increase and a 2.1-percent year-over-year rise. He went on to mention fleet/lease consignors experienced a 2.9-percent sequential price decrease and a 1.6-percent annual increase. Kontos also noticed dealer consignors saw a 1.9-percent average price increase versus November and a 9.2-percent uptick versus December 2009.

Kontos said ADESA Analytical Services estimates that auction industry inventory levels stood at 31 days at month-end compared with 38 days last December, “an indication of continued tight supply.”

Based on data from CNW Research, Kontos recounted that retail used-vehicle sales in December slid down 7.2 percent year-over-year for franchised dealers but edged higher by 0.2 percent for independent dealers. He added on a month-over-month basis, used-vehicle sales rose for both franchised (up 9.7 percent) and independent dealers (up 6 percent).

Kontos wrapped up his commentary by pointing out certified pre-owned vehicle sales in December spiked 9 percent versus November and 14.3 percent compared with December 2009, according to Autodata.