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Used-Vehicle Outlook: Supply of Large Luxury SUVs Rising

Used-Vehicle Outlook: Supply of Large Luxury SUVs Rising

By Philly Murtha, April 30, 2018
Consumers shopping for a late-model vehicle will still be able to find used cars and SUVs at reasonably stable prices as they continue to come off-lease this year. That said, wholesale prices are up from a year ago, according to J.D. Power Valuation Services (formerly NADA Used Car Guide). However, the division’s recent used-vehicle outlook findings might indicate that there are good prospects in a few used luxury and mass-market SUV segments, where wholesale auction volume has risen significantly year-to-date.

J.D. Power Valuation Services latest “Perspective—Spring 2018” reports that the used-vehicle market during the past two years was weaker in general due to an expanding off-lease vehicle supply, a stable credit environment, higher incentives, plus “modestly higher” fuel prices. Additionally, demand for new vehicles has been tied to 36 straight months of increasing incentives, based on data collected by J.D. Power and auto forecasting partner LMC Automotive. All of these factors will continue to impact the used-vehicle market going forward, but mainly on a segment-level basis, the report says.

In the latest update, J.D. Power Valuation Services reports that its proprietary Price Index (seasonally adjusted) for wholesale used vehicles up to 8 years old increased nearly 2.5 index points in March 2018 from the same month a year ago. Additionally, the average wholesale used-vehicle price in March 2018 for nearly half of 17 vehicle segments rose over 1%, while seven categories posted dips or rises of less than 1% from February 2018.

Compact, Small Car Average Wholesale Used Prices Rise
The biggest news in the used-vehicle market update was a resurgence of Compact and Subcompact (small car) prices. These segments’ average wholesale used-vehicle prices were the strongest in the industry in March 2018—up 4.3% and 4.6%, respectively.

In addition, the high-volume Midsize Car segment—which includes current best-sellers Toyota Camry, Honda Accord, and Nissan Altima—also saw a wholesale used-vehicle price uplift in March of 3.5%. The fourth-highest rise in wholesale used-vehicle price was 3% for the Large Car segment, which includes high-volume models like the Dodge Charger, Chevrolet Impala, and Nissan Maxima.

Why was there an uptick in these car segments’ used-vehicle prices? The spring update suggests that it may have to do with federal tax returns. Buyers in these car segments tend to be more sensitive to “cash down” payments and this year, the average federal tax refund was $2,893, up 0.5% from the average 2017 refund, which gave used-vehicle buyers more money for healthy down payments in March.

Compact Premium SUV Wholesale Used-Vehicle Supplies Surge
J.D. Power Valuation Services also reports that March used-vehicle auction volume was up 13.4% from February, although 11.7% lower than a year ago. In addition, wholesale used-vehicle supplies that increased the most at the segment level year-to-date were: Compact Premium SUVs (+71.7%) and Large SUVs (+27.8%), which indicates there may be more late-model SUVs for used-vehicle shoppers to consider.

Among all segments, the Large Premium SUV average wholesale used-vehicle price dipped the most from a year ago (-3.1%). Used large premium SUVs for shoppers to consider might include the Infiniti QX80, Mercedes GLS-Class, Cadillac Escalade, Lincoln Navigator, or Toyota Land Cruiser.

In addition, the wholesale used-vehicle price for Compact Premium SUVs also fell 1% in March. Models to browse in this segment include the popular Audi Q5, Acura RDX or Mercedes GLK-Class, Porsche Macan or Lexus NX—all of which ranked highly in the J.D. Power 2018 U.S. Vehicle Dependability StudySM (VDS) that evaluates reliability of three-year-old vehicles (2015 model-year).

Dip in Midsize Premium Car Used Price May Offer Opportunity
On the car side, the steepest dip was among Midsize Premium Cars; the average wholesale price was down 1.8%. Possible used luxury midsize cars to browse might include the BMW 5 Series and the Lexus GS, which ranked highest in its segment in the 2018 VDS.

For shoppers who are not in the market for a luxury model, there also are possibilities. Used Large SUVs may be a value option. Not only did late-model auction volume rise in double digits for Large SUVs in March, but the average wholesale used-vehicle price in March ebbed slightly (- 0.1%), presenting an opportunity for buyers. Popular used models in this segment include the Chevrolet Tahoe and the Ford Expedition, which ranked highest in its segment in the 2018 VDS.

Additional Research:

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