March & April 2020 Kontos Kommentary: Current Used Vehicle Market Conditions

Summary

After a strong start to 2020 in January and February, the COVID-19 crisis wiped out virtually all gains in wholesale prices.  March and April average prices fell a cumulative 15.1% after peaking in February, and April’s 16.3% year-over-year drop is the largest ever in the data series used by KAR Global Analytical Services, which tracks data back to 1994.

On the retail front, used vehicle sales and CPO sales were down significantly (around 40% or higher year-on-year).

Details

According to KAR Global Analytical Services’ monthly analysis of wholesale used vehicle prices by vehicle model class, wholesale prices in March averaged $10,827 — down 4.5% compared to February and down 2.4% relative to March 2019, as seen in the following table:

In April, average prices dropped another 11.1% compared to March and down 16.3% versus April 2019, as the following table shows:

All model class segments experienced month-over-month and year-over-year price declines, many in the double-digits.

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 both midsize cars and midsize SUV/CUVs in March, but down for both segments in April, as seen in the following tables:

April’s price declines for off-lease units more than offset any lingering pre-crisis price gains in early March.

Similarly, prices by major seller type were down significantly by April. Average wholesale prices for used vehicles remarketed by manufacturers were up 4.3% month-over-month in March (due to pre-crisis price strength in early March), but this was more than wiped out by a 12.9% drop in April, leaving prices down 8.2% year-over-year. Prices for fleet/lease consignors were down 3.8% sequentially in March and another 13.9% in April, leaving them down 20.0% annually. Average prices for dealer consignors were down 3.4% and 10.5%, respectively in March and April, leaving them down 14.9% relative to April 2019.

Based on NADA data, retail used vehicle sales by franchised and independent dealers were down 38.2% month-over-month and down 40.5% year-over-year in March (April data unavailable at time of this report).  March CPO sales were down 32.5% from the prior month and down 39.5% year-over-year, according to figures from Autodata. In April, CPO sales dropped another 21.0% sequentially, leaving them down 45.6% year-over-year.

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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