As he has stated before, Manheim’s Chief Economist Thomas Webb found 2012 thus far to be “a healthy realignment in the wholesale market.”
Following a decline each of the five months prior, wholesale used-car prices were unchanged on a mix-mileage and seasonally adjusted basis, according to the consultancy’s Used Vehicle Value Index. The index remained at a level of 120.7 last month, which was a 1.8% drop from last year.
“Sellers certainly knew that 2011 prices could not be sustained, while buyers knew that they were paying too much — but they had no choice,” Webb stated during Manheim Index’s Quarterly Conference Call last week.
He went on to say that as the market continues to realign itself, it would leave the industry in a “better place, with prices still high, but not disruptively so.” Webb, unlike many others within the industry, does not think that low supply was the sole reason for the high prices of used vehicles.
“It was a major factor in 2009, but it was less of one in 2010, even less of one in 2011, and, this year, I believe it has been virtually a non-issue,” he said.
To clarify, Webb pointed out that the percentage of rental risk in the marketplace rose by double digits in the first half of the year. “Despite this jump in volume, there was no decrease in price, which I believe is a testament to the manufacturers' discipline on the new-vehicle side of the market.” The discipline, he believes, was enabled by the permanent restructuring in the industry.
As other industry analysts expressed an expectation that the used-car supply volume will increase next year, Webb cast a conservative vision predicting that those numbers would increase more in 2014 than they would the coming year. He also estimates a smaller increase in 2013 repossessions, “in the neighborhood of 75,000 or so,” due, partly, to the significant increase in subprime lending.
As for last month’s strong sales, Webb found the “14.9 million rate was stellar. On a three-month moving average basis, if you look from the middle point of 2009 to the present, and you take out the silly ‘cash-for-clunkers’ program, that line is vertically straight,” he said.
While he believes there will be a plateauing of those new-car sales, Webb thinks it’s plausible to see 15 million new-car sales next year should the economy continue its comeback.