Wholesale Inventory is Up Due to Slow Retail Sales
Resale prices in the wholesale market for out-of-service commercial fleet vehicles have declined slightly due to the increase in auction inventory resulting from sluggish used-vehicle retail sales, according to Frank Grochal, vice president of used vehicle sales for ARI, a fleet management company headquartered in Mt. Laurel, N.J. The increased inventory, in addition to the model-year buildout, has caused wholesale resale prices for intermediate-sized fleet sedans to decrease, on average, approximately 5 percent. Likewise, resale values for minivans continue to remain soft due to the ongoing excess inventory of these units in the wholesale marketplace.
The key reason for the lagging used-vehicle retail sales is the heavily incentivized new-vehicle market. These incentives are prompting some consumers to buy entry-level new vehicles instead of used vehicles. Independent dealers are finding that inventory on their lots is growing, and as a result, they are buying fewer used vehicles at auction. “This is causing inventory to increase at the wholesale level,” said Grochal. “Although inventory is up, this doesn’t mean there is an overabundance of vehicles, it just means that there are more vehicles from which dealers can choose,” added Grochal.
The weakest region of the country is the Northeast. But in all other regions, used-vehicle demand is either stable or strong. However, higher gasoline prices have started to impact resale values for large SUVs. Compact SUVs have yet to be affected by the higher gasoline prices and continue in strong demand at auction.
Grochal forecasts a strong used-vehicle market in the fall. “All of the dealers I talk with are optimistic about the used-vehicle market. I see no reason to feel otherwise,” added Grochal.