Used car prices up 5.1%, consumer confidence hits 17-year high

Wholesale used vehicle prices rose 5.1% in February, from the same month in 2017, but prices were flat compared to January as consumer confidence increased to the highest level since November 2000, according Jonathan Smoke, chief economist for Cox Automotive and compiler of the Manheim Index.

The Manheim Used Vehicle Value Index increased to 131 but is at the lowest level since July 2017. Prices rose for all types of vehicles, except for midsize cars. Prices increased the most for pickups and vans.

“As expected, now that prices are more in line with the general trend prior to the hurricanes, the rapid acceleration of depreciation has slowed to normal,” according to the Manheim used vehicle report. “We will likely miss the normal ‘bounce’ in used vehicle prices in March as tax refunds will again be delayed as part of the IRS effort to combat identity fraud.”

For the week ending Feb. 12, the amount of refunds distributed fell 2%, from the same time in 2017, and represents nearly $2 billion in refunds, the report shows. But for the week ending Feb. 23, the number and total amount of refunds were up from the same time in 2017, suggesting that the rate has risen for tax refund processing.

“Prices should be on firmer footing by April as retail demand kicks into gear.”

In February, used vehicle sales rose 2%, from the same month in 2017, and the seasonally adjusted annual rate of sales was 39.6 million vehicles. The average price of rental vehicles sold at auction rose 4%, and since January, prices increased 2%. The average miles on rental vehicles sold at auction increased 11% to 46,300, from February 2017.

In the third quarter of 2018, which ended Jan. 31, the average vehicle sales price for America’s Car-Mart rose 0.3% to $10,662. The Bentonville-based buy here, pay here used car dealer reported vehicle sales increased 5.1% to 11,420 vehicles. On Feb. 26, shares of Car-Mart (NASDAQ: CRMT) reached at 52-week high of $51.65, and on Tuesday (March 7), shares closed at $50.30. The lowest the stock has traded at in the past 52 weeks was $31.85.

Consumer confidence was at the highest level in more than 17 years, and consumer sentiment rose to its second highest level in more than 13 years. This suggests that tax reform is driving the increases as the lower taxes start to be seen in paychecks, according to the Manheim report.

The Conference Board Consumer Confidence Index rose to 130.8, up from 124.3 in January. In November 2000, the index was 132.6. The index is a part of the monthly Consumer Confidence Survey, which is completed by Nielsen for The Conference Board and provides existing and projected business conditions and consumer attitudes and purchasing plans.

“Consumers’ assessment of current conditions was more favorable this month, with the labor force the main driver,” said Lynn Franco, director of economic indicators at The Conference Board. “Despite the recent stock market volatility, consumers expressed greater optimism about short-term prospects for business and labor market conditions, as well as their financial prospects. Overall, consumers remain quite confident that the economy will continue expanding at a strong pace in the months ahead.”

Consumer sentiment increased as a result of positive views on jobs, wages and higher after-tax pay, said Richard Curtin, chief economist for the Surveys of Consumers. In February, the consumer sentiment index rose 3.5% to 99.7, from the same month in 2017. Since January, consumer sentiment increased 4.2%. Curtin, who is research associate professor for the University of Michigan, completes monthly consumer surveys.

“Consumer spending continues to be strong and is driving the economy,” according to the Manheim report. “The first two months of the year saw severe winter weather and marginal declines in new sales, but higher paychecks from tax reform combined with tax refunds should see improving retail spending including auto sales this spring.”