ADESA Says Wholesale Used Vehicle Market has Reached an “Inflection Point”

Based upon an analysis of wholesale used vehicle prices by model class, ADESA feels that a number of factors leads the company to believe that the worst is over for the used-car market. The analysis is based on the AuctionNet database which contains nearly six million wholesale auction transactions. ADESA Analytical Services has segregated the database using the J.D.Power & Associates Vehicle Segmentation Guide to study trends by model class. The results show that while auction prices in June 2003, were down from year-ago levels, it was at a much lower rate than previous months, and on a month-to-month basis, prices are improving slightly. Average prices in June were up more than $200 from their trough in April and represent the second monthly increase. ADESA says it expects prices to continue to compare more favorably to the depressed prices seen last summer, when zero-percent financing was re-introduced. The company also says that other factors that influence its opinion are:

1. New vehicle incentives are not having as much positive impact on new vehicle sales, and the negative impact they have had on used car prices may be leading some retail customers back into the used car market.

2. Preliminary data on retail used car sales in June shows the first year-over-year increase this year in sales by independent dealers. The company says this is important because customers have been heading towards franchised dealers, and bringing attractive trade-ins with them.

3. According to the ADESA Auction Inventory Index, inventories were down relative to year-ago levels beginning in May and remain down currently. This indicates that the oversupply of late model units provided to auctions by the manufacturers and their captive finance arms has been worked off.

4. The ADESA Auction Dealer Optimism Index was up for the second consecutive month in June, meaning that dealers purchased a higher percentage of vehicles offered for sale by other dealers at ADESA auctions than they did in June of last year. The study concludes that this is an indication of stronger market conditions as well as more realistic price expectations on the part of sellers.