Data collected through the first three weeks of August shows that used vehicle prices have improved relative to July and are on track to end the month even stronger than anticipated. So far month-to-date, the J.D. Power Valuation Services’ Seasonally Adjusted Used Vehicle Price Index has increased by 2.3 points – relative to July – to 122.0. August’s preliminary result marks the third consecutive month of index growth and puts it on track to reach its highest level since late 2015.
The used vehicle market really started showing its strength in the middle half of 2017, and there are no signs of it letting up. Most of the market’s lift in prices has been driven primarily by mainstream car growth, however, mainstream utility segments continue to show firmness as well. However, luxury car and SUV segments are not experiencing the same long-running positive trend as their mainstream counterparts due in part to higher incentive spend on the new side of the market. There are two primary factors behind why used market continues to heat up, first dealers are placing more emphasis on used vehicle operations, and second vehicle affordability is becoming increasingly important to consumers.
In non-index terms of wholesale prices of used vehicles up to eight years in age have increased by 0.8% so far in August relative to July. Mainstream segments continue to outperform their luxury counterparts and passenger car prices are still generally firmer than SUVs.
Most of the month’s early success can be attributed towards strong performances of small and mid-size cars prices. So far in August, small car prices have improved by around 1.6% followed closely by mid-size car gains of 1.4%. Large utility, large pickup and mid-size pickup prices are also performing better than the overall industry average and have increased between 1% – 1.3%. Remaining mainstream segment performances range between gains of 0.2% – 0.5%, except for mid-size utility which has experienced a loss of 0.2%.
On the luxury side of the market, wholesale prices have not performed nearly as well as their mainstream counterparts. Losses so far this month have been the most severe for luxury large and luxury mid-size utility segments, prices for the pair are down 1.7% and 0.4%, respectively. However, on the opposite end of the spectrum, luxury compact car and luxury compact utility prices are up 0.2% and 0.6%, respectively.