Used Vehicle Value Index
By applying statistical analysis to its database of more than 5 million used vehicle transactions annually, Manheim has developed a measurement of used vehicle prices that is independent of underlying shifts in the characteristics of vehicles being sold. View the index methodology.
The Manheim Index is increasingly recognized by both financial and economic analysts as the premier indicator of pricing trends in the used vehicle market, but should not be considered indicative or predictive of any individual remarketer's results.
Wholesale Prices Decline in December
Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) decreased 0.59% month-over-month in December. This brought the Manheim Used Vehicle Value Index to 161.1, a 14.2% increase from a year ago.
Manheim Market Report (MMR) prices declined each week over the four full weeks of December, resulting in a 2.2% cumulative decline on the Three-Year-Old Index. In the last full week of December, the Three-Year-Old Index declined 0.6%, which was larger than the average decline for the final week of the year over the last seven years. MMR retention, which is the average difference in price relative to current MMR, averaged 99.4% in December. The sales conversion rate averaged 51% over the month, which was a decline from November and relatively low for this time of year.
On a year-over-year basis, most major market segments saw seasonally adjusted price increases in December. Luxury cars and pickup trucks outperformed the overall market, while most other major segments underperformed the overall market.
Mixed retail results for vehicle sales. According to Cox Automotive estimates, total used vehicle sales volume was down 5% year-over-year in December. We estimate the December used SAAR to be 38.0 million, down from 40 million last December but up compared to November’s 37 million rate. The December used retail SAAR estimate is 20.2 million, down from 20.8 million last year but up month-over-month from November’s 19.6 million rate.
Using a rolling seven-day estimate of used retail days’ supply based on vAuto data, we see that used retail supply peaked at 115 days on April 8. Normal used retail supply is about 44 days’ supply. It ended December at 49 days, which is slightly above normal levels. We estimate that wholesale supply peaked at 149 days on April 9, when normal supply is 23. It was up to 47 days by month end as the wholesale sales pace slowed.
December total new vehicle sales were up 6.4% year-over-year, with three more selling days compared to December 2019. The December SAAR came in at 16.3 million, a decrease from last year’s 16.8 million but up from November’s 15.6 million rate.
Combined sales into large rental, commercial, and government buyers were down 25% year-over-year in December. Including an estimate for fleet deliveries into the dealer and manufacturer channel, we estimate that the remaining retail sales were up 12% year-over-year in December, leading to an estimated retail SAAR of 14.2 million, up from 13.9 million last December and up from November’s 13.4 million rate. We estimate that fleet sales were down 36% in 2020, while retail sales were down 10%, and the overall new vehicle market finished the year down 15%.
New vehicle inventories dipped slightly in December and came in around 2.7 million units, which was down 22% from December 2019.
Rental risk pricing improves. The average price for rental risk units sold at auction in December was up 6.4% year-over-year. Rental risk prices were up 1% compared to November. Average mileage for rental risk units in December (at 52,000 miles) was up 1% compared to a year ago and down 4% month-over-month.
Coronavirus increase led to lower spending in the fall. Retail sales fell 1.1% in November, and the decline in spending was worse than the consensus expectation of -0.3%. Auto sales declined more than spending on other goods as sales excluding motor vehicles and parts declined 0.9% while motor vehicles and parts were down 1.7%. The only major category gainers were grocery stores (+1.9%), building materials (+1.1%), and non-store retailers (+0.2%). Total consumer spending declined 0.4% in November as personal income fell 1.1%. Spending on new motor vehicles declined 5.2%. The decline in personal income was driven by an 8.5% decline in proprietors’ income and by a 3.3% decline in government transfer payments as unemployment benefit payments declined 9%. Residential construction activity increased in November as starts and permits both grew and reached new multiyear highs. Low mortgage rates and increased demand for single-family homes and second homes have been helping new single-family construction grow since April. Home sales lost momentum in November, however. Both pending and new home sales, which are based on new contracts signed, declined in November, as did existing home sales. The pending home sales index declined 2.6%. New home sales declined 11%. Both types of homes sales have seen a declining pace of sales throughout the fall. Existing home sales declined by 2.5% in November. The housing market has lost momentum due to record prices amid record low supply. However, home sales are still up substantially from last year. Existing home sales were up 26% year-over-year in November, while pending home sales were up 16%, and new home sales were up 21%.
Consumer Confidence according to the Conference Board declined 4.6% in December and left confidence down 31% year-over-year and down 33% from February. Plans to purchase a vehicle in the next six months declined in December to the lowest level since April. Plans to purchase a home also declined in December to the lowest level all year. The final reading on Consumer Sentiment from the University of Michigan increased 4.9% in December and left sentiment down 20% from February. The index of consumer sentiment from Morning Consult saw declines for most of December, leaving it down 23% since Feb. 29.