Lane watch: ‘Tipping point’ arrives in wholesale market
If you have interested vehicle purchasers who can get financed, perhaps your store inventory acquisition costs and potential gross profit might be improving.
Black Book said on Tuesday that the arrival of May seems to have brought a potential “tipping point” since overall wholesale prices declined for the first time since early February. According to Market Insights, overall wholesale prices softened by 0.10% during the week that closed on Kentucky Derby Saturday. That’s after Black Book noticed values ticked up 0.20% during the last week of April.
Along with values softening, analysts pointed out the estimated average weekly sales rate dropped to 49% last week, too.
“May began with what seemed to be the tipping point for the market according to many industry experts,” Black Book said in the newest report. “After 12 consecutive weeks of increases, the market turned last week with the first widespread depreciation since early February.
“Additionally, conversion rates and available inventory, both in OEM and dealer lanes, are also declining,” analysts added.
Before getting into specifics about cars and trucks, Black Book looked at wholesale movements based on vehicle age. And if dealers can find vehicles longer in the tooth but with some via life remaining, they might be able to satisfy a specific customer base.
“The 8-to-16-year-old units began to experience softening two weeks ago and continued to speed up their depreciation last week, dropping 0.15%. For reference, the 2-to-8-year-old units dropped 0.10% and 0-to-2-year-old vehicles were stable last week,” analysts said.
And now for a glimpse at what cars and trucks did on the value front last week.
On a volume-weighted basis, Black Book said overall car segment values decreased 0.06% last week after rising 0.27% a week earlier.
Analysts noted that only three of the nine car segments generated price increases last week. But one segment is still marching higher.
Black Book noticed values for sporty cars continued to climb, albeit by 0.39%. That’s not as much as the average price increase that sporty cars posted during the previous 15 weeks when they moved up by 0.64% weekly.
Analysts added that prestige luxury cars (down 0.34%) and near luxury cars (down 0.27%) sustained the largest value declines last week, marking the second week in a row of decreases for the segments.
A similar scenario played out in the truck department last week.
Again on a volume-weighted basis, Black Book found that overall truck segment values decreased 0.12%. That’s much different than the prior week’s movement, which was a price increase of 0.17%.
Black Book indicated just four of the 13 truck segments reported price increases last week, representing the smallest number of truck segments posting a value increase since the beginning of February.
However, analysts mentioned minivans continue to generate positive prices movements, but the rate of increase is slowing. Black Book said values for those people movers increased 0.30% last week. During the previous 11 weeks, the price increase for minivans was 0.74%.
Also edging higher were small pickups (up 0.10%) and full-size pickups (up 0.09%).
With perhaps that “tipping point” now passed, analysts reiterated that “as always, the Black Book team will continue to monitor and report on developing trends.”