Manheim Used Vehicle Value Index – March 2013 Manheim Index Declines in March Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) fell in March. It was the third consecutive monthly decline, and it brought the Manheim Used Vehicle Value Index reading to 120.4, which was 4.6% lower than a year ago. Although the availability of vehicles in the wholesale market has improved recently, so too has the level of retail demand. As such, we would view the recent moderation in wholesale pricing as more a natural realignment with respect to new vehicle prices than a supplydriven issue. Retail used unit sales increased nicely in the first quarter of 2013 as new vehicle sales begot used vehicle transactions and higher off-lease and off-rental volumes led to the subsequent retail sale of those units. Manheim Used Vehicle Value Index January 1995 = 100 Manheim Used Vehicle Value Index January 1995 = 100 New vehicle sales pace levels off. New cars and light-duty trucks sold at a seasonally adjusted annual rate of 15.3 million in March. This was identical to the average pace over the past four months, and it was also consistent with the outlook for the full year. To date, the leveling-off in the new vehicle sales rate has not brought forth the traditional response – increased incentives. Nor do we believe it will. To be sure, lease support has grown and the easing of retail financing continues (longer loans at low rates to customers with lower FICOs), but the actions have not been excessive or irresponsible. Indeed, given the strength of used vehicle residuals and the exceptional way loan portfolios have performed of late, it is likely the favorable lease and credit cycle has considerably longer to run. Used vehicle sales continue to rise. Dealer sales of used vehicles rose 12% in March and for the first quarter as a whole, according to CNW. Although some of these sales were "forced" in the sense that trade-ins and end-of-term fleet units basically require a subsequent retail sale, the retail market was also clearly helped by the fundamentals of rising employment and free-flowing credit. In March, tax refunds switched from being a negative to a positive for the used vehicle market. Tax refunds this January and February were $31 billion (or 14%) lower than a year ago, according to the IRS. In March, however, tax refunds were up $11 billion (19%) from last year's level. Rental risk prices reflect richer mix. A straight average of auction prices for rental risk units reached a new high in March, but this mostly reflected a shift in the composition of vehicles sold. For example, in the first quarter of this year, current and previous model year vehicles accounted for 61% of all of rental risk units sold, and older units accounted for the remaining 39%. In the first quarter of last year, current and previous model year vehicles accounted for only half of all rental risk units sold. The model mix of vehicles sold at auction has also moved upscale relative to last year. The average mileage on rental risk units sold during the quarter was about 5% lower than last year. Older, higher-mileage units still dominate the lanes. Despite improved commercial consignment volumes, the average mileage for all units sold continued to rise in the first quarter. And for dealer-consigned units, the uptrend accelerated. Shifts in average mileage and volume sold by price tier showed no meaningful differences in trend during the first quarter. The price analysis by market class showed that, on a seasonally adjusted basis, midsize cars have weakened the most in recent months. Blame that on very competitive offerings in the new vehicle market. Price Changes for Selective Market Classes March 2013 vs March 2012