Black Book: Weekly Market Update

On Mar 3, 2021

Black Book recently published an update to their weekly Market Update report:

Wholesale Prices, Week Ending February 27th

As much of the country thawed out last week after extreme winter weather brought some parts of the country to a standstill the week prior, the wholesale valuations continued their gains with all reporting segments experiencing positive week—over-week changes. Activity at the auctions was strong with buyers increasing their bids in an effort to secure inventory as they prepare for the Spring.

This Week. Last Week 2017-2019 Average (Same Week)

Car segments +0.85%. +0.61% -0.34%

Truck & SUV segments +0.60 +0.33% -0.29%

Market +0.68% +0.43% -0.32%

Car Segments

The Car segments continued their gains this past week, with the rate of increase growing to +0.85%.
As was the trend in the prior week, Sporty Cars had the largest segment increase, with the rate of gain increasing to +1.89% (compared to +1.09% the week prior).
The traditional tax season segments, those with vehicles under $10,000 continue to do well. This past week, the Sub-Compact Car segment accelerated the growth to an impressive +1.75%.
The Near Luxury Car segment has been slower to see gains, but this past week it finally moved into positive territory.

Truck Segments

The Truck segments also increased the rate of gains this past week at +0.60%, compared to +0.33% the week prior.
The Sub-Compact Crossover segment’s low price point makes it an attractive choice for tax season preparation and that was evident in last week’s +1.39% increase in values.
The Full-Size Luxury Crossover/SUV segment was the only segment to experience declines two weeks ago, but last week it also experienced positive gains at +0.08%.
Full-Size Trucks were strong throughout much of last year and the momentum is growing again. This past week, values climbed another +0.75%, compared to +0.46% the previous week.

Weekly Wholesale Index

2020 ended with used wholesale prices at elevated levels. With economic patterns (including the automotive market) driven by the pandemic, normal seasonal patterns (e.g. 2019 calendar year) in the wholesale market were not observed for most of the year. We saw a similar picture in 2009, at the end of the Great Recession. The question still remains whether we will go back to normal seasonality in 2021. So far, Spring market arrived about 7 weeks earlier than during a typical pre-COVID year.

Retail (Used and New) Insights

Sentiments from the retail side are that demand has been sensitive to weather conditions in certain parts of the country, but in general, dealers with inventory under $15,000 are seeing growth in demand. New dealers are concerned about their new inventory levels and are hoping to supplement their supply with viable used vehicle substitutes.
The microchip shortage continues to wreak havoc on new vehicle production with Ford announcing last week that they will be forced to stop production at multiple facilities in Europe. Full impact of the shutdowns is still unknown, but they hope to have production at normal output by Spring.
Hyundai has remained unscathed from the microchip shortage due to their consistent ordering since the onset of the pandemic, but they didn’t escape a recall. They are recalling 82,000 EVs globally at a cost of $900 million due to the potential of a battery fire. This news came one day after the announcement of their plans for the Ioniq 5 all-electric compact crossover, slated to be released as a 2022.
The Kia Carnival, the redesigned replacement to the Kia Sedona, was unveiled last week. The redesign will be available next quarter as a 2022 model year.

Used Retail Prices

With the proliferation of ‘no-haggle pricing’ for used-vehicle retailing, asking prices accurately measure trends in the retail space. Retail demand slowed down leading up to the December holidays, and thus resulted in declining retail asking prices over the last several weeks of 2020. As demand rebounded in January, retail prices seemed to lag wholesale prices – retail asking prices continued to decline throughout January and have remained stable in February. This analysis is based on approximately two million vehicles listed for sale on US dealer lots.

Volume

Used Retail

Used retail listing volume stayed essentially flat since the beginning of the year but remains at levels above where the industry was in January, during the pre-COVID time of 2019.

Days-to-turn have been increasing since November and is approaching historic average level. Recently, the trend is starting to show signs of reversing as retail demand picks up in many parts of the country.

Wholesale

Auction sales rates grew this past week after sellers demonstrated to the market the week prior their determination to not budge on their floors. Buyers stepped up to the higher prices this past week and it was reflected in the level of wholesale price increases and the increase in conversion rates.

The concern for new inventory levels as a result of the microchip shortage is leading dealers to seek out newer used units that could be offered as substitutes to new vehicle buyers. The 0-2-year old used units have seen a larger increase in pricing, as compared to 2-8-year old vehicles.
Inventory in the pipeline is expected to remain below normal so sellers are planning to hold their floors heading into the last month of Q1.

Monthly Retention Index

February was another record-breaking month, with the Retention Index reaching 130 points for the first time. All segments saw an increase in the Index with Full-Size pickups leading the way – that segment stands 23% higher than it was in February of 2020.

The purpose of Black Book Wholesale Used Vehicle Retention Index is to provide an accurate and unbiased view of the strength of used vehicle wholesale market values. The index is calculated using Black Book’s published Wholesale Average value on 2- to 6-year-old used vehicles, as percent of original typically equipped MSRP. Black Book’s Wholesale Average is a benchmark value for used vehicles selling in the wholesale auctions with the vehicle quality in Average condition. The index is weighted based on registration volume and adjusted for seasonality, vehicle age, mileage, condition, and inflation (MSRP).

Originally posted on F&I and Showroom