NADA Report: Mainstream Brands Overshadow Luxury Segment

We reported previously that the end of 2014 and start of 2015 looked strong for retail automotive. With gas prices down and demand for trucks and SUVs up sales figures had shown great strength despite a terrible winter for parts of the U.S. The NADA Used Car Guide Industry Update for April takes aim at the current climate in retail automotive.

The report began by helping dealers to understand the economic climate in the U.S. That climate, as reported on by NADA showed some less than stellar employment numbers. After 12 straight months of job growth above 200,000, March jogged in with a figure of 126,000. Despite that setback, wages, nationally were up 2.1 percent for March. NADA also looked at Q1 as a whole and called it an overall disappointment. Part of the report reads, “Some of our confidence in the strong tailwinds has ebbed, but given the low rates, the low levels of personal debt and the continued demand for motor vehicles, we’re still biased toward growth picking up in the second half of 2015.” NADA further expects the cost of a barrel of oil will be below $60 per barrel for the first half of 2015 and not get above $70 on the year.

In the retail automotive realm, it was good news for used car prices. NADA reported “used vehicle prices improved 2.3 percent on a monthly basis for March.” Used vehicle prices have reportedly experienced a rise of about 1.5 percent in March over the past 20 years. The report also stated that most vehicle types met expectations for price growth with the exception of large pickups and subcompact cars.

However, as we reported previously, large pickups continue to impress. During the month of March this segment saw a 7.2 percent price increase. No other segment saw nearly that kind of growth. Mid size SUVs were the next closest at 4.0 percent. AutoNation CEO Mike Jackson talked about the surge in truck popularity in terms of sales. During a CNBC interview Jackson said, “Look at the entire industry, the entire increase for the month of February was all in trucks plus 12 percent … and quite frankly the trend towards trucks until we get back to $3.50 a gallon, I don’t see it mitigating at all so it’s trucks, trucks, trucks.”

Volume of vehicles sold at auction that were a maximum of 8 years old was up 5 percent over march 2014 for a total of 341,000 units. This was due in large part to supply of the 2014 model year, which totaled 70,000 units. That represents a 7 percent rise over February and a 33 percent increase over the 2013 model year for March of 2014.

According to the NADA report, depreciation of the used car market as a whole during April is expected to be around 1 percent in total. This would be a drop of 0.5 percent off of the average during the month during the past decade. Once May and June arrive, deprecation could easily hit 3 percent and then reach a plateau for the summer. However deprecation for the luxury segments is expected to be higher than other groups.

Vehicle Trade-in values decreased by 1.1 percent relative to March. Typically mainstream brands did better than the luxury segments, with the highest performer being sub compact which boasted a 2.3 percent increase in trade-in value. Mid-size luxury SUVs lost an average 3.2 percent of their trade-in value.

Meanwhile, NADA reports that new vehicle sales are up just 0.4 percent, however the SAAR climbed to 17.05 million and sales are up 5.6 percent for Q1 overall. Year-over-year domestic sales are up 4.4 percent. Import deliveries are up 6.7 percent year-over year.

The question is, what will the rest of the year look like? Gas prices should be down in 2015 and inventory from auctions appears to be trending up. What will those and other factors do to shape the year underway for the retail automotive space?