August 2020 Kontos Kommentary: Current Used Vehicle Market Conditions

Summary

Wholesale used vehicle prices continued to outperform expectations in August and well into September, especially when looked at on a year-over-year basis. On a month-over-month basis, however, August prices were fairly flat relative to July. Weekly data on prices and conversion rates in late August and throughout September did indicate some softening in demand, and this will be explored more fully in our September report.

Details

According to KAR Global Analytical Services’ monthly analysis of wholesale used vehicle prices by vehicle model class, wholesale prices in August averaged $13,498 — up 0.9% compared to July, up 19.1% compared to pre-COVID/February and up 20.1% relative to August 2019, as seen in the table below.

Compact, Midsize and Luxury Cars showed month-over-month average price declines, as did Compact and Midsize SUV/Crossovers.

When holding constant for sale type, model-year-age, mileage, and model class segment — using criteria that characterize off-lease units — prices were up on a year-over-year basis for midsize cars and midsize SUV/CUVs in August, as seen in the following table:

The following graph shows trends in average prices throughout the pandemic, using the same criteria:

As the graph shows, wholesale auction prices continued to show strength across the board from June through August and into September, after rebounding in May from significant declines in March and April.  Prices for pickup trucks are particularly strong, as demand for these units exceeds both new and used supply.

Based on NADA data, retail used vehicle sales by franchised and independent dealers were up 5.2% month-over-month and up 0.9% year-over-year in August.  August CPO sales were down 6.5% from the prior month and down 8.6% year-over-year, according to figures from Autodata. Additional retail sales trends are available via KAR Global’s Interactive Dashboards.

Source: Analysis is based on over seven million annual sales transactions from over 250 of the largest U.S. wholesale auto auctions, including those of ADESA as well as other auction companies. KAR Global Analytical Services segregates these transactions to study trends by vehicle model class, sale type, model year, etc.

Disclaimer: The views and analysis provided herein relate to the vehicle remarketing industry as a whole and may not relate directly to KAR Auction Services, Inc. The views and analysis are not the views of KAR Auction Services, its management or its subsidiaries; and their accuracy is not warranted.

Forward-Looking Statements: The statements contained in this report and statements that the company may make orally in connection with this report that are not historical facts (including, but not limited to, expectations, estimates, assumptions and projections regarding the industry and business) may be forward-looking statements. Words such as “should,” “may,” “will,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “promises”, “likely to” and similar expressions identify forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected, expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include those matters disclosed in the company’s Securities and Exchange Commission filings. The company does not undertake any obligation to update any forward-looking statements.

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