Used Car News | Home
- Hits: 10653
Wholesale prices took their worst hit ever in October.
The Manheim Used Vehicle Value Index fell 6 percent, the biggest drop in the Index’s history.
The Index adjusts prices for mix, mileage and sustainability. The unadjusted performance was even worse, a decline of more than 10 percent.
“It was not a statistical fluke,” said Tom Webb, Manheim’s chief economist.
“The wholesale market was awful in October.”
Conversion rates fell to an average of 50 percent from 60 percent in October, according to Tom Kontos, ADESA’s executive vice president of analytical services. Consignors reported single digit conversion rates at some sales.
Meanwhile, unsold volumes continue to pile up at auctions.
ADESA Analytical Services estimates that auction industry inventory volumes stood at 66 days of sales at October month-end, compared to 43 days at the same time last year.
This creates even more downward pressure on prices, Kontos said.
Lack of credit was the main reason for the auto sales slump, but that’s now playing second fiddle to employment, Webb said.
Nonfarm payroll employment fell by 240,000 in October, according to the Bureau of Labor Statistics. Job losses over the last 3 months totaled 651,000.
In October, the unemployment rate rose from 6.1 to 6.5 percent, and the ranks of the unemployed increased to 10.1 million.
Chances of those workers returning to work are shrinking.
U.S. employers are projecting a continued decline in hiring for the fourth quarter, according to the seasonally adjusted results of the latest Manpower Employment Outlook Survey conducted quarterly by Manpower Inc.
All this bad news dampens consumer confidence.
The Conference Board's Consumer Confidence Index fell to an all-time low in October.
The Index now stands at 38, down from 61.4 in September.
The Confidence Index had shown signs of improvement in September.
The Present Situation Index decreased to 41.9 from 61.1. The Expectations Index declined to 35.5 from 61.5 in September.
“The market still needs customers who have a willingness and an ability to pay,” Webb said. “Today, they have neither.”
A gloomy outlook keeps even the credit-worthy off dealers’ lots, said Art Spinella, president of CNW Marketing Research.
“People are just assuming they won’t get approved, so they don’t even bother looking,” he said.
Gas prices caused the most worries earlier this year. Now they’re below $2 for most of the country, but other worries have replaced them, Spinella said.
The biggest headache remains sagging home values, said Jessica Caldwell, manager of pricing and industry analysis for Edmunds.com.
“Once that stabilizes, other parts of the economy will look more optimistic,” Caldwell said.
But that will take some time.
Caldwell expects a bleak picture for the next few months.
Webb foresees the Manheim Index falling to 100 in the near future. It currently stands at 104.2 and has been above 100 since July of 1995.
“I don’t think anyone expects we’re anywhere near the bottom,” he said.