Declines expected to improve though month’s end.
Used vehicle depreciation for units up to 8 years in age picked up through the first two weeks of September bringing the overall market average down by 2.1%, one point worse than August’s month-end figure of 1.1%.
Across all segments, losses month-to-date increased compared to what was recorded in August with the exception of large SUVs and mid-size vans. Large SUVs prices have risen in September by 0.8%, a fairly substantial swing after last month’s 0.7% decline. As for mid-size vans, prices are still falling, but this month’s decline of 1.6% is slightly better than August’s full-month drop of 1.7%.
As far as other segments are concerned, September’s preliminary depreciation leaders include the compact and mid-size cars segments, both of which dropped by an average of 2.5%. Smaller declines were recorded in the compact utility and luxury car segments, but they still trailed closely behind with average drops of 2.0% each, followed by a combined average slip of 1.4% for mid-size and luxury utilities. Surprisingly, after a long run of strong monthly performances depreciation in the large pickup segment picked up a bit, but month-to-date losses are mild at best as average prices declined by under 1%.
While prices have fallen off by a relatively steep rate so far this month, the severity in movement is somewhat deceiving as wholesale activity slowed considerably over Labor Day week. Looking back at wholesale activity by auction sale type over the course of the shortened holiday sales week (September 2nd through the 6th), we see that there was a noticeable downturn in activity through the lanes. During the week of September 2nd dealer consignment activity decreased by almost 20% which turned out to be the major contributor to the 14% decline in overall volume for the week.
The brief respite in sales activity over the holiday week likely kept better equipped and conditioned vehicles out of the lanes – especially on pre-2010 model year units – which ultimately brought averages down arbitrarily. In addition to there being fewer units at auction, there were also fewer dealers actually bidding on vehicles during this period which caused less competition than what’s normally seen.
During the week of September 9th there was a clear rebound in dealer activity and a subsequent firming in prices. Looking ahead, NADA expects to see depreciation slow to a rate below 2.0% by month’s end.