Lane watch: Black Book uses latest observations to shape initial 2021 expectations

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LAWRENCEVILLE, Ga. – 

Along with sharing the previous week’s value movements, Black Book used its newest COVID-19 Market Insights report to delve deeper into projections going into the new year, using the latest wholesale trends and anecdotes from dealers to shape its expectations.

Perhaps of highest importance to used-car managers, analysts are seeing both wholesale volume and retail demand continue to be soft in the auction lanes and store showrooms.

“As a result of the COVID-19 mandates that have recently been going into effect in many parts of the country, along with the toll that COVID has continued to take on the economy this year, dealers are seeing their retail demand suffer,” Black Book said in the newest report.

“We are starting to see an incremental influx of used inventory coming to the marketplace,” analysts continued. “But with weakening demand, we saw a decrease of about 15% in the auction sales rate compared to the summer months.

“It also appears that most of the lease returns and trade-in vehicles never make it to auctions as grounding dealers are keeping the inventory for retail sales,” Black Book went on to say.

Latest value moves

With those observations as a backdrop, Black Book went into a discussion about its newest volume-weighted data, beginning with the car space.

Analysts reported that overall car segment values decreased 0.78% last week, representing a jump above the previous week’s decline of 0.48%.

Black Book indicated values for compact cars now have dropped for 15 weeks in a row. Analysts computed the average weekly decline during that stretch to be 0.92%.   

“The luxury segments, especially the high lease volume near luxury segment, are seeing consistent week-over-week declines now that the remarketers have adjusted floors in recent weeks,” analysts said.

“The luxury OEMs typically have very strong upstream sales so what does make it to the auction has typically been picked over and pre-selection of inventory is also contributing to the weekly declines as the available wholesale inventory is in poorer condition,” Black Book continued.

In the truck arena, Black Book volume-weighted data showed overall truck segment values — including pickups, SUVs and vans — nearly produced a decline twice as large as the previous week. Last week’s drop came in at 0.68%, up from 0.38% a week earlier.

Analysts pointed out that smaller crossovers continue to see fairly consistent week-over-week decreases, but the value drops for full-size SUVs and full-size truck accelerated to 0.94% and 0.57%, respectively.

“Full-size trucks have been exceptionally strong since values rebounded over the summer months,” Black Book said. “However, this past week the values started to increase their rate of decline on the 1500 level trucks. In contrast, the 2500 and 3500 models are still not showing any signs of weakness.”

And analysts also made the connection to another value movement in the truck space that is likely connected to the traffic passing through your neighborhood.  

“Full-size vans have been trending throughout the pandemic as if all is normal in the market,” Black Book said. “This segment came into the pandemic with lower than normal supply levels so the declines were never as severe and there was no large bounce back since the values didn’t see the same level of decline as most other segments.

“As consumers are finding themselves ordering more and more online, this is increasing the demand on this already low of supply segment, so the expectation for this segment is that values will continue to see little depreciation in the months to come,” analysts went on to say.

Longer-term expectations

With COVID-19 cases and deaths increasing substantially across the country, Black Book is expecting weakness in retail demand and overall cautiousness by dealers to last well into 2021.

“With much weaker retail demand without a second federal stimulus, and a projected increase of used inventory, we forecast a higher than seasonal drop in wholesale prices this winter,” analysts said.

“It is worth noting that after record breaking increases in wholesale prices over the summer, we are still well above pre-COVID-19 prices, so the projected drop over the winter months will simply get us back to the baseline,” they continued.

Even though retail demand is softening, Black Book said that dealers are still reporting that lack of inventory is still a problem.

“Leading up to the Thanksgiving holiday, we saw buyers slow down in their restocking of lots, especially when sellers were holding firm to high floors,” analysts said. “However, this past week we saw dealers return to more active bidding and sellers lowering their floors.”

“High condition scores and low mileage units continue to garner the most attention and bring a premium as dealers are looking for units that are front-line ready,” Black Book continued. “Anything that requires too much reconditioning is a risk that many dealers aren’t willing to take right now with retail demand showing signs of softening.” 

One more note on the projection front as Black Book touched on the manufacturing landscape.

“Supply chain struggles have been a problem for OEMs since the onset of the pandemic when production was initially halted and those issues aren’t improving quickly,” Black Book said. “In many places, delays have gotten better, but recent spikes in COVID are leading to more delays.

“The much-anticipated return of the Ford Bronco is one of those vehicles being impacted. We will now have to wait until next summer to see this vehicle hit dealer lots,” analysts went on to say.



Source : AutoFinanceNews