The latest Manheim data is showing that wholesale used vehicle prices are stable. However, this stability was largely the result of strong SUV, crossover and truck pricing. Smaller vehicle segments, like midsize, compact and subcompact cars, continue to see declining prices. This presents consumers in the market for a car with the chance to save money.
Vehicle Pricing Data
Manheim is the world's largest wholesale auto auction company. They keep track of wholesale used vehicle prices with their Manheim Used Vehicle Value Index. This measure of vehicle pricing is adjusted for make and model, mileage, and season.
In December, Manheim reported that used vehicle prices increased by 0.2 percent. This brought the Manheim Used Vehicle Value Index to a reading of 124.9, which is still down 0.6 percent from a year ago.
The company noted that this was the sixth year in a row where wholesale pricing has remained relatively stable. This was despite the fact that 2016 saw a "significant" increase in the number of vehicles at auction.
However, that doesn't tell the whole story.
While pricing as a whole has remained stable, certain vehicle segments are rising in price while others are falling. For example, because gas prices have been low and the economy has been strong, the industry has seen trucks, SUVs and crossovers explode in popularity in recent years. This, in turn, has led to cars becoming less popular.
And Manheim's data backs up those claims. Over the last four years, the adjusted wholesale prices for pickups have risen 28 percent. Meanwhile, compact car values have fallen 14 percent over that same time period.
Furthermore, compact car prices saw the biggest pricing decrease of all vehicle classes between 2015 and 2016. Midsize cars weren't far behind and finished, as a segment, with the second biggest pricing decrease.
Leasing Has Impacted Used Vehicle Pricing
A big reason why we are seeing lower used vehicle prices in many segments is new car leasing.
Leasing started to grow in popularity following the recession and it has exploded in the last couple of years. It helped to drive the growth of the auto sales market that broke records in 2015 and in 2016.
And all of this leasing is beginning to impact the used car market in notable ways. How? When a car is leased, it's typically returned to the used car marketplace in a few years (generally three) time.
So when all of these vehicles go off-lease, dealers see an increased supply. When there is increased supply, we typically see prices that get pushed down. And when prices get pushed down, consumers can swoop in and get good deals.
What It All Means
Manheim's data suggests that while pricing is pretty stable, certain vehicle segments (sedans and small cars) are seeing significant wholesale price drops.
Wholesale price refers to what a dealership pays for a car, while the retail price is what the dealer sells the car for. Lower wholesale prices typically lead to lower retail prices, which means consumers can buy these cars for less.
At the same time, most people are flocking to larger vehicles like SUVs and trucks, which is keeping their prices up. Meanwhile, small vehicle segments are being pushed to the side, which is why their prices are generally dropping.
This means that it's a great time to find a good deal on smaller sedans and hatchbacks. If you're in the market for a traditional car or want to save money, look no further than the midsize, compact and subcompact car segments. There should be some great pricing out there on recent model used vehicles, including those that have just come off-lease.
These cars also make great targets for buyers with less than perfect credit. Their affordable pricing should make it easier to keep your payments reasonable, and they are cheaper to own and operate, as well.
If you have bad credit and are worried that you won't be able to get auto financing, think again. Auto Credit Express assists people dealing with imperfect credit get connected to dealerships in their area that may be able to help. Get started today by completing our safe and secure online loan request.