Dealer preparation for the spring selling season took AuctionNet wholesale prices over the first half of January in a familiar direction – up.

Relative to December, the average price of vehicles up to five years in age grew by 1.1% to match the seasonal bump historically seen over this period of time (mileage and mix adjusted).  This being said, the month’s price growth is slightly back of what we saw last year (1.5%) which may indicate that we’re getting close to a used price plateau after a three year period of expansion.  

At a segment and model year level, January’s results make for an interesting juxtaposition as vehicles at the opposite end of the efficiency spectrum – large SUVs, mid-size cars, and compact cars – outpaced all other segments in terms of month-over-month price appreciation.

Although overall AuctionNet supply through the first of the year is down by -19% relative to the same period last year, large SUV supply is down by twice that amount, or -40% (see chart).  This scarcity in supply combined with normal seasonal demand drove MY 2007 – 2011 prices up by an average of 1% compared to December.  Clearly skeletal supply is counteracting the negative effect that $3.40 per gallon gasoline would normally have on the segment.

Car prices on the other hand are benefitting both from the reduction in supply and the elevated level of fuel prices.  As a result, mid-size and compact car average prices have grown by just under 1% over the first three weeks of the month.

Regionally, wholesale prices have increased the most in Mountain (3.6%) and Desert Southwest (1.1%) states, although exceedingly low volume in those areas accentuates the impact that even the slightest change in demand has on price. 

Prices have fallen slightly in Midwest and Eastern states, but the average decline of just -.6% will most likely be reversed by month-end.
Maybe prices will reverse course as the year progresses, but I think this is unlikely. 

As of right now, most signs – including feedback that we’ve received from NADA’s dealer body – point to another year of demand growth for new and used vehicles, and typically growing demand plus declining supply doesn’t equal lower prices. 

Considering that used prices have grown such much over the past three years it’s natural to wonder how much higher they can go.  Next week we’ll reveal our answer to this question at NADA’s annual convention in Las Vegas (February 4th – 6th) and will post results to Twitter and Facebook shortly thereafter.  Be sure to keep an eye out for updates on this topic – as well as other breaking news – as the show progresses.