MCLEAN, Va. - April 6, 2020 - It was another rough week for the used-vehicle segment of the automotive industry as sales across all makes and models dropped precipitously throughout the country, according to the most recent COVID-19 Valuation Services Update issued by J.D. Power issued this week.

Wholesale activity continued to be severely disrupted by stay-at-home orders, suspension of physical auction sales by all major auction houses, and the suspension of all non-digital sales through April 3 at ADESA auctions. Wholesale auction volume fell 72% the week ending 3/29 versus the week prior. This follows a decline of 40% the week of 3/22. Compared to March 2019, volume is down 38% or 183,000 units.

At the state level, auction activity ground to a halt in hardest-hit areas. Volume declined by an average of 96% in California, New York, and Michigan. Sales in California fell to below 500 units. This compares to the roughly 13,000 sales that occurred each week prior to the outbreak.

"Volume was down to a lesser extent in Florida, Pennsylvania and Texas, dropping 60% on average, largely because these states, until last week, had not issued stringent shelter-in-place directives to their citizens. Next week's numbers are likely to tell a more somber story. This will have major implications for the used vehicle sector -- since these three states are responsible for nearly a third of all wholesale sales," says Jonathan Banks, VP Vehicle Valuations & Analytics, Valuation Services, J.D. Power.

Used Passenger Vehicles Are Taking The Hardest Hit

At the segment level, compact and midsize car prices fell most in the industry (a similar result occurred the week prior). Large pickup prices held up relatively well, which is likely due to less stringent stay-at-home mandates in high truck demand states (Texas for example). Premium segment losses were generally less than mainstream declines.

"It is important to remember that the market dynamics for premium vehicles differ from mainstream makes and models. Premium vehicle demand -- and thus price -- does not strengthen through a given first quarter like it does for mainstream vehicles. This relative lack of inflation pre-COVID-19 explains why the premium segment appears to have been less affected," says Banks.

Sales Under Severe Downward Pressure

As far as used retail sales are concerned, used sales at franchise dealers fell nearly 40% on a weekly basis last week. Used profit margins are beginning to show signs of contraction as well, though these results are not yet definitive. After being relatively stable over the first three weeks of March, margins slipped by 0.6% last week to an average of 6.8%.

To read the entire COVID-19 Valuation Services Update from J.D. Power visit:

https://bit.ly/3aNbBvJ

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LANE COOPER