CARY, N.C. -

Wholesale vehicle prices climbed to an all-time high in June, according to Cox Automotive, which said Wednesday the company’s Manheim Used Vehicle Value Index was a record 149.3 for the month.

But don’t expect these highs in used-car values to last.

More on that later, but for June’s purposes, the Manheim index was up 6.3% year-over-year. Wholesale values (when adjusted for mix, mileage and seasonality) climbed just under 9% from May, according to the analysis.

Similarly, over at Black Book, the company said Wednesday its Used Vehicle Retention Index climbed 9.1 points month-over-month, reaching 115.1 for June. Black Book's index was consistent with year-ago levels of 115.0. 

The month-over-month increase in Black Book's index ends a string of three months of declines. The year-over-year steadiness follows two months of decline.

“Fueled by Federal stimulus and a lack of new inventory, retail demand for used vehicles in June was strong,” Black Book senior vice president of data science Alex Yurchenko said in a news release.

“Additionally, limited used supply due to various factors (e.g. delayed lease returns, pause in many delinquency repositions and limited throughput of auctions) helped used prices to bounce back to pre-COVID-19 levels,” Yurchenko said. “Black Book’s Seasonally Adjusted Retention Index jumped a record 8.6% in June, matching the value of the Index in 2019. Due to weak economic conditions, we do not expect this strength to continue, and we project a drop in values later this summer.”

Cox Automotive analysis echoed much of that sentiment, both in terms of positive signs abound in the used-car market at the end of the second quarter, but also the notion that it may not last long.

“We have enjoyed a dramatic and rapid recovery in the auto market,” said Cox Automotive chief economist Jonathan Smoke said in the analysis. “However, the next three to six months could see some reversing trends as COVID-19 case growth threatens to stall the job recovery, credit conditions could deteriorate rapidly with the expiration of stimulus benefits, and additional waves of supply will hit the used-vehicle market later this summer when demand is usually softer.”

Meantime, here are more specifics on how June’s wholesale price movement shook out.

According to the Manheim index report, luxury cars showed the most year-over-year growth at 9.7%. Pickups were up 5.9%, SUVs/CUVs were up 4.6% and compact cars climbed 4.0%. Midsize car prices climbed 1.8% from June 2019 and van prices were down 3.5%.

Weekly Manheim Market Report prices climbed throughout the month, ending June with the Three-Year-Old Index up 7.1% cumulatively.

Cox Automotive calculates MMR Retention as the average difference in price compared to current MMR. That ratio was an average of 102.4% in June and remained above 100% each day of the month, the company said.

‘Double-whammy’ of price pressures

In terms of where wholesale values could land during the second half of the year, Smoke offered more context during a quarterly call detailing the Manheim index and more.

“The very strong recovery clearly wasn’t something that we thought could happen so quickly,” Smoke said during the call. “And looking forward, we do see some concerns that are likely going to end up with values not performing quite as well over the back half of the summer and into the fall.”

For starters, there is the issue of seasonality, he said. Used-vehicle values tend to slow down in the fall, in part because of what happens in the new-car market: new models make their debut and automakers try to unload prior-year models with steep discounts.

Those price cuts on new tend to pressure used-car prices, as well, Smoke said.

“So, this year, in addition to that normal seasonal pattern, we anticipate that’s precisely the time that we think there’s going to be more credit-performance issues on the part of consumers that are still unemployed and dealing with less unemployment compensation,” he said. “Of course, that could change if we have another round of stimulus (money) approved and that helps to support that.

“But no matter what, I think most of the credit bureaus and economists are expecting consumer credit specifically to deteriorate  even if we do have more stimulus, because some of what has basically been happening behind the scenes has been a product of the amount of accommodations that we don’t think (are) going to continue to be the case, especially if unemployment becomes more permanent, than the temporary assumptions that were assumed back in March and April,” Smoke said.

Also impacting the demand side of the equation are the pandemic’s current trending as well as the potential for a second wave of COVID-19 in the fall. Not to mention, the lead-up to the presidential election isn’t likely to help consumer sentiment, he said.

In terms of used-vehicle supply impacts, the major catalyst for that in the back half of the year is expected to be repossession volume — not only from the delayed arrival repo units from earlier in the year but also the amount of actual repossessions in the second half exacerbated by some of the credit issues mentioned above, Smoke said.

“We know that there’s additional supply that will be coming to the market later this year. Principally, we think the biggest  source of supply is going to be delayed repossessions that basically have already taken place or are in process of happening that would have been coming into the market earlier this year, but COVID-19 and moratoriums on doing repossessions essentially postponed  and delayed that activity,” Smoke said.

“In addition, if you have credit deterioration as you typically do in an economic downturn, usually the first thing that starts to rise at auction are repossessions,” Smoke said. “And so we’re expecting not only the delayed repossessions, which will not be a small number of vehicles, we’re actually expecting the repossession rate to be growing, and as long as this unemployment continues to be at the levels that we’re seeing, they’re higher than what we had in the Great Recession.

“So, you have a double-whammy of both supply and demand happening, likely more in the August-September-October time frames.”