Lane watch: Evaluating another ‘new normal’
With how turbulent wholesale prices have been in recent weeks, Black Book’s experts went to a descriptive term that might make some dealers and finance companies cringe with flashbacks about the pandemic or other challenging stretches.
Yep, it seems after wholesale values dropped another 1.86% overall last week, Black Book acknowledged the market is “establishing a new normal.”
That latest wholesale price drop came after weekly declines of 1.49%, 1.48%, 1.55%, 0.95% during the past month.
Here’s how Black Book analysts explained the situation in its latest installment of Market Insights released on Tuesday.
“Last week saw a continuation of significant weekly declines, with the market accelerating its depreciation following the Thanksgiving holiday,” they said in the report. “Despite robust auction attendance, ample inventory, and strong conversion rates, sellers are now revising their reserve prices, which is causing the market to grapple with establishing a new ‘normal.’
After mentioning the estimated average weekly sales rate increased to 54% last week, Black Book added, “We saw a small uptick in auction conversion rates, with the wholesale market so volatile, sellers are willing to take less or lose money to avoid a larger loss down the road.”
Black Book noticed car prices took it particularly hard during the week when the calendar flipped from November to December. On a volume-weighted basis, Black Book reported overall car values decreased 2.40%.
And prices for older cars declined slightly more, as Black Book pegged the drop for 8-to 16-year-old cars at 2.44%. Analysts added prices for cars 2 years old and newer softened another 1.82%.
Black Book pointed out values in all nine car segments decreased last week, with four of those segments sustaining declines greater than 2%.
Setting a single-week record in Black Book’s database was the value decrease for compact cars, who plummeted 4.32%. That’s depreciation rate surfaced a week after a drop of 3.84% for those units.
Also sustaining a significant value drop were sporty cars, which decreased another 3.32% last week after falling 2.05% a week earlier, according to Black Book tracking.
Analysts added that only two car segments posted depreciation readings less than 1% last week. They were premium sporty cars (down 0.57%) and subcompact cars (down 0.88%).
In the truck world, Black Book determined via its volume-weighted data that overall truck values decreased a little less than the overall market, sliding by 1.64%.
No matter the age of the truck, analysts noticed that values dropped at about the same rate on average, with models 2 years and newer softening by 1.48% and 8 to 16-year-old units dipping by 1.51%.
Black Book said values for all 13 truck segments declined last week, as four dropped by more than 2%.
Pacing the truck decreases were full-size luxury SUVs, sinking by 3.81% last week after Black Book said they said their values sunk by 3.20% a week earlier.
Analysts mentioned the notable price fall-off for compact vans continued. While not surpassing 4% for the third week in a row, Black Book noted compact vans’ value dropped another 2.67%, which analysts said is “still a large single week decline.”
Black Book noted that values for compact vans have dropped by 3.66% per week on average over the last four weeks.