Manheim’s Market Intelligence team is comprised of professionals with an average fifteen years experience in the automotive industry. The team has a mature data science capability which it has leveraged to develop a new digital portal customers can use to track the performance of the secondary market and view price predictions for the most popular new models. The team recently worked with Manheim’s global Chief Economist’s team to establish an Australian equivalent of the US Used Vehicle Value Index – a trusted gauge of upswings and downturns in used vehicle prices commonly referenced in the Wall Street Journal and CNBC.
The Australian Used Vehicle Value Index
The Australian Used Vehicle Value Index shows trends in used car prices back to 2006. It has a number of useful applications for industry. Product Manager Brenton Barnes explains “it has been useful for validating the opinions buyers and sellers have about the used car market, and in some cases addressing misconceptions. One myth I come across from time to time is that used car prices increase during a recession. The theory goes that in a recession would-be new car buyers settle for a used car or demonstrator – pushing up prices. The reality is, during the global financial crisis all asset prices suffered. We found used vehicle prices fell 17% below their long run average”.
The index has also been useful in highlighting trends in major vehicle segments. For instance, the index was useful in measuring spikes in sales prices for large vehicles at around the time of the Ford and Holden plant closures. As evident in Figure 1, when Ford ceased domestic manufacturing in October 2016 large car prices spiked to 19% above their long run average and when the Holden closed their South Australian plant in October 2017 prices rose to 20% above the long run average before normalizing again.
Figure 1. Large Car Index
The team has also been able to expose seasonality in used car prices. The team identified that vehicles sold in the first half of the year were more likely to achieve above-average prices. In particular, vehicles sold in March achieve above-annual average prices 92% of the time (12 out of 13 years) and vehicles sell below average in October 92% of the time – see index heat map in Figure 2 below.
Figure 2. Manheim Used Vehicle Value Index – Heat Map
The team has also analysed correlations between the index and drivers of used car prices with the key drivers identified as consumer confidence, the unemployment rate and new car sales. The team has identified;
- A one percent decline in consumer confidence has historically resulted in an average 3.0% decline in used car prices.
- A one percent increase in the unemployment rate has historically resulted in an average 3.5% decline in used car prices.
- Growth in new car sales typically corresponds with a decrease in used car prices as the supply of trade-ins and ex-lease vehicles to the secondary market increases. However, when growth in new car sales exceeds a certain point, used car prices also increase as demand for new vehicles spills over into the secondary market.
Manheim’s Market Intelligence team has a mature data science capability which it has leveraged to develop a new digital portal customers can use to track the performance of the secondary market and view wholesale price predictions for the most popular new models. The team also provides custom valuations, consulting and advice on matters relating to the used car market.