Channel Stuffing, Incentives Responsible for Slip in Manheim Index
ATLANTA — Wholesale used vehicle prices on a mix-, mileage-, and seasonally adjusted basis declined 1% in November, according to Manheim’s Used Vehicle Value Index report. Due to this decline, the Manheim Used Vehicle Value Index fell 0.3% from a year ago to 124.7.
Although some of the month’s decline can be attributed to the growing wholesale supply of used vehicles, some of the biggest driver’s for the month’s decline were related to new-vehicle market activity. According to Manheim, channel stuffing and higher incentives in the new market lowered prices in that segment. So in an attempt to stay competitive, the used vehicle market adjusted prices downward in order to move inventory.
“If our theory for the price movement is correct, manufacturers may have more control over future residuals than currently believed," the firm's report stated, in part. "They will, however, need to better balance new-vehicle volume objectives with already assumed end-of-term residual projections."
After two months of year-over-year declines, certified pre-owned sales were up 10% in November, according to the Manheim report. CPO sales for the full year are now set for a record of more than 2.6 million units sold, the company added.
According to the report, the availability of retail financing has been a boon for the used-vehicle market. “Although total used vehicle sales for franchised and independent dealers have yet to be released for November, channel checks indicate that total used-vehicle sales in the month increased again during the month,” the company stated.
In the new-vehicle market, the seasonally adjusted annual selling rate (SAAR) came in at 17.8 million in November. An increase in truck and crossover sales boosted average transaction prices during the month; however, higher incentives offset that increase. Dealers also ended the month with higher-than-desired inventory levels, despite the month’s strong sales. “As such, the marketing push will likely continue in the short term,” the company stated in its report.
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