McLEAN, Va. -

Wholesale prices “remained true to typical October form”  last month, analysts with NADA Used Car Guide said when pinpointing the average decline for the month.

They explained that October values for vehicles up to five years in age fell by an average of 2.5 percent relative to September. NADA UCG shared this data in the November edition of Guidelines, its monthly look at the used- and new-vehicle markets.

Analysts discovered increasing numbers of off-rental units pressured used passenger car and van prices down by 3.7 percent and 3.3 percent, respectively. They indicated the same force also helped to pull utility vehicle prices down by 2.2 percent.

NADA UCG added that low supply, stable fuel prices and seasonality kept pickup prices from falling beyond 1 percent in October.

“Although price drops weren’t as extreme as they were in September, compact cars, midsize cars, and midsize vans all continued to give back a sizable share the premiums gained through the first half of the year,” the report explained.

At the segment and model-year level, the compact car price declines — which came in as high as 5.5 percent  — were followed closely behind by midsize van and midsize car declines of 5.2 percent and 4.7 percent.

NADA UCG determined that for the first time in three months, prices for large SUVs fell across the board by an average of 2.1 percent, while midsize utility prices were pressured down 2.8 percent by the previously mentioned influx of rental units.

Sticking more-or-less with the seasonal norm, analysts said luxury midsize and near luxury cars realized average price declines of 3.6 percent and 3.9 percent, respectively.

“This being said, the price erosion observed for core luxury segments over the past two months is nearly double what we saw last year, which is perhaps a reflection of embedded economic pessimism more than anything else,” analysts pointed out.

“Official Used Car Guide value adjustments for November’s edition were approached with the expectation that the sharp downward trend witnessed on compact and midsize car prices over the past few months would endure due to a continued injection of off-rental supply and relaxed consumer demand,” they continued.

“As a result, nearly half of the vehicles in these segments had values reduced by 3 percent or greater,” analysts went on to mention.

NADA UCG noted  that midsize van values were similarly addressed for this month’s edition with the heaviest reductions being concentrated in later model years and on models with significant rental fleet penetration.

Downward adjustments for the majority of the remaining segments were mild by comparison as large pickups, SUVs, and most luxury segment average declines came in at 2.8 percent or less, according to the report.

New-Vehicle Discussion

Turning over to the new-vehicle marketplace, NADA UCG indicated that sales continued a gradual ascent in October as expanding inventory and the release of pent-up demand lifted sales by 7 percent relative to last year.

Last month’s SAAR of 13.2 million was the second-best result seen so far this year, according ot the report, coming in just shy of February’s 13.38 million SAAR.

Benefitting from brisk sales of newly redesigned models, analysts noted that Volkswagen and Chrysler Group led the way with improvements of 40 percent and 27 percent, respectively.

“In VW’s case, the 2012 redesigns of the Beetle and Passat are paying early dividends as sales of the iconic couple improved by 220 percent over last year, while the U.S.-built sedan notched just over 5,000 sales for a 59-percent month-over-month improvement,” analysts highlighted.

“For its part, Chrysler’s performance was due to the continued support of the Jeep brand — in particular the Compass and Liberty — and solid growth of Chrysler 200 sales,” they continued.

NADA UCG recapped that Dodge (up 23 percent), Hyundai (up 23 percent) and Nissan (up 22 percent) rounded out the top five non-luxury brand performers for the month.

Although Ford sales were flat, analysts mentioned that demand for the Escape and the redesigned Explorer helped to push the automaker’s final tally up by 13 percent.

At 6 percent, NADA UCG noted that Chevrolet’s results came in just behind Ford’s and were driven in large part by healthy sales of the Equinox CUV and the compact Cruze sedan.

Once again, analysts acknowledged that lingering effects from March’s earthquake artificially depressed results for Honda (down 1 percent) and Toyota (down 7 percent), although sales did improve by nearly 10 percent for each on a sequential basis.

“Unfortunately it seems as if Japanese OEMs are set to face another challenging period as an unusually severe monsoon season in Thailand has led to extreme flooding in the country over the course of past month and a half,” NADA UCG said in its report.

“As a result, numerous Japanese OEMs and their suppliers have been forced to cease manufacturing operations in that country until the water subsides,” the report continued.

“While the full impact to U.S. operations is still to be played out, the disruption to the supply chain has already forced both Honda and Toyota to either cancel scheduled overtime or curtail North American production — in Honda’s case by 50 percent — until the second week of November in an effort to conserve parts. This is certainly bitter news considering the hard fought progress made over the course of the past few months,” the report went on to state.

In terms of luxury brand sales, NADA UCG revealed Audi and Mercedes-Benz each saw sales improve by 26 percent over last year, which was 3 points better than Volvo (23 percent) and 8 points better than BMW (18 percent)

Finishing out the top five was Acura with a 1-percent increase, marking the first time that sales have grown on an annual basis since back in April.

NADA UCG calculated that a buildup of 2012 model-year inventory and a nearly complete return to pre-earthquake production by Japanese automakers pushed October’s month-end new vehicle days’ supply up by nine days over September to 58.

“While this is the highest level of inventory seen since February of this year, the result remains two days back from the 60 days considered ideal and 10 days back from where things stood last year,” analysts pointed out.

“In addition, there are still multiple brands — Audi, BMW, Honda, Hyundai and Kia — whose supply remains below 40 days,” they added.

Referencing information from Autodata, NADA UCG said overall incentive spending in October declined by 7.6 percent on a month-over-month basis to reach an industry average of a little more than $2,450 per unit.

The data also showed Hyundai’s average of just $764 per unit was the lowest for any manufacturer and was good for a 48-percent improvement over last October’s figure.

Mini, Chrysler, Mitsubishi, Kia and Volvo also experienced annual declines north of 30 percent. With month-over-month reductions of 5.9 percent and 0.1 percent respectively, analysts added incentive spending at Chevy and Ford continued to trend downward.

NADA UCG went on to cite Autodata’s information indicating that Honda reduced incentive spending by 4.3 percent compared to September. However, October’s average cost per unit of $2,200 was 12 percent greater than last year and remains in historic-high territory.

Analysts added that Toyota actually reduced incentive spending by nearly 26 percent on a sequential basis, placing October’s average of $1,599, which was 17 percent lower than last October.

“Although there has been much speculation surrounding an aggressive return of across-the-board incentive spending due to the return of Japanese production, there is little evidence to suggest that incentive levels will arbitrarily increase throughout the remainder of the year,” NADA UCG surmised.

Analysis of Broad Economic Indicators

NADA UCG suggested that October’s economic results can be described as mixed.

The Bureau of Labor Statistics estimated that 80,000 jobs were added to non-farm payrolls in October, which helped to nudge the unemployment rate down a tenth of a point to 9 percent.

Although October’s jobs report was undoubtedly anemic, federal officials revised non-farm payroll employment for August up from 57,000 to 104,000 (a 47,000-job gain), and September’s figure from 103,000 to 158,000 (a 55,000-job rise).

Per the Bureau of Economic Analysis’ advance estimate of real GDP, the U.S. economy appears to have picked up some momentum in the third quarter as increases in personal consumption expenditures and nonresidential fixed investment overcame continued decreases in state and local government spending and increases in imports to push quarter-over-quarter GDP growth up by 2.5 percent.

“Tepid positive news aside, entrenched consumer pessimism continues to be reflected in the Conference Board’s consumer confidence Indices, as both the core Consumer Confidence Index and the Expectations Index slid to levels last seen in the first quarter of 2009,” analysts conceded.
NADA UCG noted the confidence index lost 6.6 points to land at 39.8.

“While the expectations index — meant to measure consumer’s short-term (six -onth) expectations regarding the economy — eroded by 6.4 points to reach 48.7, the indices have lost 32.2 and 48.7 points respectively since hitting a post-recession high back in February,” analysts pointed out.

On the housing front, the latest results for the S&P/Case-Shiller Home Price Index showed that home prices remained nearly static in August relative to July. Although prices have eroded by approximately 5.6 points since last year, August’s results continued the flat course that has been in place since May.

“This is perhaps a signal that we may be at, or very near, the bottom in terms of home price depreciation,” NADA UCG estimated.

Industrial production in October as portrayed by the ISM’s Purchasing Manager’s Index reversed course from the mild increase witnessed in September by losing three-tenths of a point to settle at 50.8.

"While the PMI’s proximity to the-50 point threshold marking the boundary between economic expansion and contraction is a concern, both the New Orders and Backlog of Orders indices realized positive increases of 2.8 (to 52.4) and 6 points (to 47.5) respectively,” analysts explained.

“Regarding the uptick in the New Orders Index, ISM believes that this indicates ‘a return to growth after three months of contraction,’” they concluded.