The “spring bounce” is in full swing as used-vehicle prices in March increased 5.9% from February, bringing the Manheim Used Vehicle Value Index to 179.2, a 26.2% increase from a year ago.
Pickup trucks continue to outperform the overall market in which all segments saw seasonally adjusted price increases, in part due to a stronger-than-average spring bounce as tax refunds boosted retail demand, Jonathan Smoke, chief economist at Cox Automotive, said Wednesday during a quarterly presentation.
March ended with weekly price increases surpassing those of spring bounce periods dating back to 2014, a trend Smoke said is likely to continue for at least six to eight weeks.
Tight supply is keeping car prices high following a record uptick in the index in February. Retail supply sat at 29 days at the end of March compared with the normal 44 days, according to vAuto data. Supply has been an ongoing challenge for the auto industry a year into the COVID-19 pandemic, with rising monthly payments reawakening affordability concerns. However, tight inventories are also keeping incentive spending low and leading to positive retention values.
Retention values of used cars 1 to 3 years old increased 12 percentage points in March compared to last year and by more than 13 points from 2019, Smoke said. “Higher values have translated into previously unthinkable retention values, and we haven’t seen the peak yet,” he noted. “[The values are] a solid indicator of what leasing companies have been experiencing with residuals on a roller coaster ride last year that ended with residuals much higher.”
Meanwhile, used-vehicle sales remain strong, increasing 117% YoY in March, while the used retail SAAR was estimated at 22.2 million units, up from 20.8 million last month and up from 9.8 million from March 2020, according to Cox Automotive.
Total new-vehicle sales also increased 59.7% YoY, factoring one more selling day, despite inventory decreasing 37% YoY to 2.4 million units. The new retail SAAR was estimated at 16.4 million, up from 8.4 million in March 2020.
Meanwhile, consumer confidence is improving on the heels of the pandemic, jumping 21.3% in March, but down 17% compared with February 2020, according to The Conference Board, a nonpartisan think tank. Consumer plans to purchase a vehicle in the next six months reached a 13-month high in March, while home purchase plans increased in March to the highest level in available consumer confidence data history, dating back to 1967.
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Source : AutoFinanceNews
