As predicted, wholesale price movement through the third week of June remained on the downward course set in May, as cumulative market prices declined by $300 or 1.7% compared to the prior month.

The steep cut in gasoline prices over the past two months – which EIA puts at 50 cents from early April through the third week of June – combined with the drop-off in seasonal demand normally seen following the end of spring continues to place significant downward pressure on compact car prices, and as a result, the segment’s 3.3% fall was the biggest of any segment. 

Prices for the remaining segments all fell within a half a point or less of the market average, with the exception being the large SUV segment, which had prices slide by a more moderate 1.1%.  

Compared to last June, market prices were at a 1.5% disadvantage, which isn’t a surprise since used prices remained elevated into July of last year because of new vehicle substitute demand stemming from Japan’s natural disasters.  We can expect to see this inverted relationship in prices remain in effect until at least until August, which is when market prices took a dive in 2011.

Overall, NADA expects to see current trends stay true to their present direction which means that the usual slackening of demand experienced over the summer will be the main driver behind softening used prices near-term.  That being said, the quick descent of gasoline prices will continue to see compact car prices roughed up more than otherwise but will also help cushion the fall of truck prices; the relatively minor fall in large SUV prices for the month is evidence of this. 

I mentioned earlier that a slight reduction in the number of rental fleet units going through the lanes over the past few weeks helped to alleviate some of the downward pressure on fleet-heavy segments.  I think this observation and the fact that we’re half way through the year transition nicely into a summary of auction volume changes year-to-date.

Considering NADA’s prediction that used supply will continue to fall until well into 2013 before starting to pick back up again, it should come as no surprise that auction volume is down yet again this year.

In fact, volume for vehicles up to 10 model years in age is down by 4% compared to the same period of time last year, and even more dramatically, volume for vehicles five years in age or younger is down by more than three times that amount, or 13%.
As you would expect from movement of this type, volume for only one segment – compact utilities at +6% – has increased year-to-date, while at the opposite end of the spectrum, large pickup, large SUV, and mid-size utility volume has tumbled by 24-to-25 percent.

Based on the ongoing decline in supply at auction and the fact that values in June are a slight 1.5% below last year’s inflated level, it’s evident that the uptick in used vehicle trade-ins accompanying the growth in new vehicle sales has done little to change the current balance of supply and demand.

Next week we’ll be releasing July’s edition of Guidelines and in it we’ll provide used price results for the entire month of June, as well as an updated review of older model price movement (i.e. vehicles over 5 years in age) and our take on the future risk associated with these units.  Be sure to check it out.