The decline in used-vehicle demand led to a drop in wholesale prices in June, according to Tom Kontos in ADESA Analytical Service's June Current Used Vehicle Market Conditions and Outlook.

The latest data from the Federal Reserve Board indicates that used vehicles financed in April had an average retail price of more than $19,400, which is 61.7 percent of the average new vehicle financed that month. This put used-vehicle retail prices above the 60 percent threshold ADESA said would tip many shoppers to opt for a new vehicle rather than a used vehicle.

With used-vehicle demands weakening as a result, used-vehicle prices at wholesale were expected to moderate from their peak in May. This happened in June, as average wholesale prices fell by over $250 per unit.

"For purchasing dealers this may be viewed as a welcome respite from general wholesale price escalation seen for approximately the last year and a half, although the flip side is that declining retail demand makes it a bit harder to ultimately sell the vehicles despite their lower acquisition cost," Kontos said. "On the selling side of the wholesale market equation, moderating prices are a reminder of the cyclicality inherent in the remarketing industry and a disincentive to holding or no-sale'ing vehicles in the hopes of higher prices later."

Kontos said tight supplies of used vehicles will keep wholesale prices at relatively high levels for both buyers and sellers at auction and online in the months ahead.

According to ADESA's monthly analysis of Wholesale Used Vehicle Prices by Vehicle Model Class1, wholesale used-vehicle prices in June averaged $10,278 - down 2.6 percent from May and up 1.4 percent versus prior year.

Full-size and luxury SUVs were the only segments that showed month-over-month increases. Mid-size cars and minivans, segments particularly important to fleet remarketers, saw significant price declines in June.

Manufacturers registered a 6.7 percent month-over-month price increase and a 15.1 percent year-over-year rise; fleet/lease consignors experienced a 2.7 percent sequential price decrease and a 3.3 percent annual increase; and dealers saw a 2.4 percent average price decrease versus May and a 5.3 percent uptick versus June 2009.

ADESA estimates that auction industry inventory levels stood at 30 days at month-end compared to 35 days last June - continuing to indicate tight supply and high auction throughput.

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