ATLANTA and SAN JUAN CAPISTRANO, Calif. -

Manheim’s Tom Webb believes dealer consignment vehicles are fetching record prices, and a California used car manager has no reason to doubt it.

During his quarterly conference call on Monday to discuss the wholesale market, Webb revealed dealer consignment prices hit $10,400, what he said was “an all-time high.”

Manheim Consulting research showed dealer consignment prices didn’t approach $10,000 until a year ago and stayed above that threshold during the height of the spring market before softening for most of 2011. 

Manheim also mentioned that dealer consignment prices bottomed out during the fourth quarter of 2008 — the height of the most recent recession — at nearly $6,500.

Webb touched on how much the average mileage of those dealer consignment units has climbed, too. Back in 2008, he said it was about 86,000 miles. Nowadays, dealer consignment units have about 96,000 miles on the odometer.

So might dealer consignment prices soften later in the year like they did last year?

“Generally speaking, March is the strongest time for pricing and November is the weakest,” Webb explained. “In terms of pricing, just like the overall market, it should remain strong.”

Webb declined to speculate about a specific dealer consignment volume, deferring on the National Auto Auction Association to determine that figure. The NAAA annual survey also released on Monday indicated that 53.1 percent of all wholesale volume last year came through dealer consignment.

“The pattern of volume should be reflected of retail sales activity, and the first quarter was stronger than I anticipated,” Webb surmised.

Dealer Reaction

Harry Haber, used car manager at Capistrano Volkswagen in San Juan Capistrano, Calif., told Auto Remarketing he wasn’t surprised by what Manheim reported Monday.

“It’s been like this for the last two years. There are just no cars,” Haber admitted. 

Haber predominantly uses Manheim, attending auctions in person and utilizing the company’s online channels. He shared what it’s been like working in the dealer consignment lanes looking for clean units.

“Normally dealer consignment cars are a little less than the factory cars in the lanes. Now they’re the same or even fetching more than the factory lanes, but a lot of the factory lanes are closed right now,” Haber stated.

“The limited supply of clean cars is still an issue,” he continued. “When I’m watching the dealer consignment lane, I see the dealer groups and the lanes are filled with people. There’s pretty aggressive bidding.

“Will that trend continue? I’ve been hoping no, but I don’t see it letting down,” Haber added.

And what if a four-cylinder vehicle arrives?

“They bring over wholesale book all day long. Anything that’s four cylinder is killing it, and it doesn’t matter what lane it’s in,” Haber told Auto Remarketing.

Manheim Index Moves Higher Again

Webb indicated wholesale used vehicle prices (on a mix-, mileage- and seasonally adjusted basis) rose for the third consecutive month in March. 

The Manheim Used Vehicle Value Index came in at 126.2, an increase of 1.6 percent from a year ago. The company calculated that wholesale values are off only 1.3 percent from the record reached last May.

“With a strengthening economy offsetting the dampening effect of higher gas prices, new and used vehicle retail demand remained strong in March,” Webb explained. “Auction bidding was particularly active for mid-priced units coming out of rental and commercial fleet service.”

As Haber mentioned, prices for compact cars registered the highest year-over-year increase among the six vehicle segments Manheim tracks.

Compact car prices are up 5.1 percent, followed by midsize cars (up 3.6 percent), pickups (2.9 percent) and vans (up 1.7 percent)

Manheim determined the other two vehicle segment dropped by nearly the same rate as luxury cars declined 2.1 percent and SUVs and CUVs dipped 2.0 percent.

Wholesale demand has seen an ongoing shift to compact and midsize cars,” Webb stated. “Crossovers with fuel-efficient powertrain options are also performing well. This trend is a reflection of higher gas prices and long-term demographic shifts in the profile of used-vehicle buyers.”

Fleet and Rental Update

Looking first at the off-rental segment of the wholesale market, Manheim again found record prices despite higher volume. 

Prices for off-rental risk units climbed above $15,500 in March, almost $2,000 higher since the start of the year. However, new units sold into rental fleets approached 200,000 units, well above any point in Manheim’s recent data that goes back to 2008. Only one month last year did sales destined for rental fleets top 150,000.

“Average auction prices for rental risk units hit a new high in March,” Webb reiterated. “The number of units sold was up substantially from both February and year-ago levels. 

“Average mileage on rental risk units slipped back 37,400 miles in March from more than 40,000 miles in February,” he added.

Looking at fleet units, Manheim discovered the mileage- and seasonally adjusted price for midsize cars coming out of fleet service hit a new high in March. 

“Crossover units, which represent a growing share of the portfolio, also enjoyed record prices,” Webb surmised. “Commercial fleet sellers benefited from a portfolio mix that reflected their shift to fuel-efficient purchases in past years.

“After high unit sales in February, commercial fleet volumes at auction slipped in March,” he continued. “Average mileage on units sold at auction was up marginally in March versus a year ago and the previous month.”

Recap of Retail Sales

As has been reported by Auto Remarketing, Webb pointed out that first-quarter new- and used-vehicle sales posted their best performance since 2007.

The Manheim economist reiterated new cars and light-duty trucks sold at a seasonally adjusted annual rate of 14.4 million in March, resulting in a first-quarter pace of 14.5 million. He added used-vehicle sales rose 8 percent in March and 9 percent for the first quarter. 

Combined new and used sales totaled 10.4 million in the first quarter, up 11 percent from a year ago, according to Webb’s calculations.

“Several manufacturers felt that higher gas prices actually helped sales as customers were enticed by fuel-efficient offerings,” Webb insisted.

“If that’s true, it is probably also true for the used vehicle market since higher-quality, higher-mpg vehicles are also showing up with greater frequency in the wholesale market,” he continued.

Tax Refund Discussion 

With the deadline to file federal income taxes looming about one week away, Webb called this year’s tax refund season a “mixed story.”

Webb acknowledged, “Tax refund season is an important time for many independent dealers, especially those focused on low- to mid-priced units. The IRS reports that through the third week of March the number of refunds was up 0.7 percent, but that the dollar amount of refunds declined 2.7 percent. This was the first time in decades that the level of tax refunds did not exceed the prior year.

“In the used vehicle market, however, the number of refunds is often more important than the dollar amount since the total can be skewed by a relatively small number of returns with very high refund amounts,” Webb explained.

“What’s important to know is to which income groups, and in which form, the tax refunds flowed,” he went on to say. “Given that Earned Income Tax Credit monies (an important stimulant to the used vehicle market) were high, we would consider this year’s tax refund season better than last year’s.”

Prospects for the Remainder of 2012

Webb cautioned dealers and wholesale executives who might expect the sales pace established in the first quarter to continue.

“Unfortunately some of us may become overly confident that these trends will continue at the same pace for the rest of the year. I sort of doubt it,” stated Webb, referencing a report released last Friday where the U.S. was “dealt a disappointing blow on the employment front.”

Webb wrapped up his quarterly call by looking at factors that could be influential by happen far from any showroom or auction lane.

“We have to recognize there will be policy decisions that will affect the landscape,” Webb emphasized. “Certainly there is little chance that federal taxes and spending will be resolved any time before the election. That means there will be action taken in the lame duck session or we will have existing tax cuts expire and the automatic kick-in of some tremendous spending cuts. Once again, we will be operating in an environment of increased uncertainty because businesses and individuals won’t know the rules of the game of 2013 until right before 2013 begins. 

“And even before that, we’re going to have a ruling from the Supreme Court on health care. Regardless of your position on that, I think it’s clear that businesses and individuals have made plans that the law would go into effect,” he added.