Following is the October 2011 'Kontos Kommentary' on current used-vehicle market conditions presented by Adesa's chief economist Tom Kontos.

Summary
Wholesale prices appeared to do an about-face as they ceased their sequential and year-over-year decline seen since peaking in April. However, a deeper dive quickly reveals that prices continued to soften in all three of the traditional auction industry seller segments: factory, fleet/lease and dealer consignment.

With Fall defleeting in full swing, off-rental units sold by manufacturers and rental companies in the factory and fleet/lease lanes and online made up a higher percentage of total auction volumes in October. These vehicles tend to be late-model, higher-dollar units and therefore contributed positively to average prices for the month. Had the same proportion of vehicles been sold by each of the seller groups in September and October, average prices would have fallen by 2% on both a sequential and annual basis.

Based on this analysis, we would conclude that wholesale prices continued the modest softening pattern described in our previous commentaries.

Details
According to ADESA Analytical Services’ monthly analysis of Wholesale Used Vehicle Prices by Vehicle Model Class1, wholesale used vehicle prices in October averaged $9,842 – up 0.9% compared to September and 0.8% versus October 2010. Car prices continued to correct downward and truck prices upward as they reset from high gas prices earlier this year.

Manufacturers registered a 3.1% month-over-month price decrease and a 5.1% year-over-year rise. Fleet/lease consignors experienced a 3.1% sequential price decrease and a 0.4% annual decrease. Dealer consignors saw a 1.0% average price decrease versus September and a 3.2% uptick versus October 2010.

ADESA Analytical Services estimates that auction industry inventory levels stood at 30 days at month-end marking the second month in a row that days-supply of auction inventories matched year-ago levels; auction industry inventories had been below year-ago levels from July 2009 through August 2011, by our estimates. The rise in inventory levels is primarily a reflection of higher Fall defleeting.

Based on data from CNW Marketing/Research, retail used vehicle sales in October were up 13.0% year-over-year for franchised dealers and 11.7% for independent dealers. On a month-over-month basis, used vehicle sales were down about 16% for both groups. Certified used vehicle sales in October were down 1.4% versus September and versus prior year according to Autodata.