Average Wholesale Price at 13-Year Low, But Look for Restoration in Confidence

Wholesale prices fell to a level comparable to the period followed the Sept. 11, 2001 terrorist attacks, while improvements made in two particular segments appear to have stalled. That is according to the Kontos Kommentary column by ADESA’s Tom Kontos.

The average wholesale price during October was $8,628, a 9.6-percent decline from September and an 11.3-percent dip from a year ago. This marked the lowest level since February 1995, when average retail prices were $7,000 less than they are now, Kontos wrote.

The month-over-month progress that full-size SUVs and pickups had made since July also ended. Their values declined 3.4 percent and 6.5 percent, respectively, from September.

Compact cars were the only segment to show improvement from September, with a 2.3-percent increase. However, their prices were 14.4 percent softer compared with last October, the biggest decline of any vehicle class.

Credit availability is perhaps the biggest challenge currently facing the industry. The credit crisis might continue to cause softening in wholesale values for the rest of the year and into next year, Kontos wrote.

He noted that used unit sales fell 19.7 percent in October compared with the same period of 2007, citing CNW Research data.

“Not only are retail sales down, but dealers are also having greater difficulty using their floor plan lines to stock up on the large numbers of cars that enter the auction channel this time of year due to fall ‘de-fleeting’ of rental and commercial fleet units,” he wrote.

As for the future, Kontos was optimistic that the consumer confidence will soon be restored, causing a rebound in the economy. He said the history-making result of the recent presidential election is positively affecting the national and international mood.

“Hopefully, that mood, coupled with appropriate policy solutions by the lame-duck and new administrations, will generate greater consumer and investor confidence and lead to a gradual recovery in the months ahead,” Kontos said.

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