Wholesale used-vehicle values have continued to outpace past reporting periods, evidenced by a spike to 155.9 in Manheim’s mid-July used-vehicle value index. The increase, which rose 6.3% from the first half of June, can be attributed to dwindling used retail and wholesale inventories, said Cox Automotive Chief Economist Jonathan Smoke in a quarterly conference call. The index could hit record highs for the second consecutive month if this trend follows through the rest of July, according to Manheim. The mid-month index was first released in April when it recorded one of the largest falls since November 2008, plummeting 11.8% to 125.2. While sales increased in tandem with used-vehicle values in June, used retail sales could lose momentum in July and August as “the impressive recovery seems to have peaked in early June,” Smoke said. While the used market still “looks strong,” its performance will likely be challenged through the rest of the summer.
New-vehicle sales also “hit a ceiling in May,” he added, noting the factors affecting sales were most likely a drop-off in June incentives and tighter supplies, as auto production came to a halt in March and April. Wholesale inventory recently fell to 34 days’ supply on a rolling seven-day estimate from a 115 days’ supply peak in April, according to the mid-month index. Used retail inventory, likewise, dropped 83.9% to 24 days’ supply from 149 days’ supply in April. “I also think supply has started to become a factor in the used-vehicle market,” Smoke said, “The data that we’ve been tracking … basically implied that supply is roughly a third of what it normally is.” The fall in sales can also be credited to a loss in consumer sentiment, he added. “Some percentage of customers are starting to worry not only about the pandemic, but also worry more about their financial situation. That, too, seems to be coinciding with the stimulus checks now, well past their distribution point.” Consumer sentiment dipped in the first half of July as new coronavirus cases spiked again in many states, bringing the University of Michigan’s Consumer Sentiment index to 73.2 — only 1.4 points higher than April’s low — and reversing the June’s gains, according to Richard Curtin, chief economist at the University’s Survey of Consumers. “Following the steepest two-month decline on record, it is not surprising that consumers need some time to reassess the likely economic impact from the coronavirus on their personal finances and on the overall economy,” Curtin said. “Unfortunately, declines are more likely in the months ahead as the coronavirus spreads and causes continued economic harm, social disruptions, and permanent scarring.” Originally published on Auto Finance News
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