Seasonal Patterns
In San Diego, we typically go through a seasonal weather patch known as “June Gloom,” which signifies some cool, overcast weather to start the summer season. Much like the seasonal weather pattern, we have been forecasting a relatively cloudy summer for used vehicle pricing based on inventory and retail trends. While June average wholesale pricing (AWP) did tick downward in most categories, there were signs of month-over-month (MoM) stability in used vehicle values through the lanes.
June Breakdown
Short-term AWP declines mirrored longer-term year-over-year (YoY) declines in nearly all categories. While we had been estimating that AWPs could see sharper drops in June, some buoyancy in pricing held conversion strong through the first half of June. Even with the solid start, pricing did start to soften the last half of June, setting up what could be a tough summer. On-road motorcycle AWP fell in all categories versus the prior 90 days and on a YoY basis. The double-digit decline was more apparent in older, rougher products, with cleaner-newer models still exhibiting price stability. The off-highway product also slid versus near and long-term comps, signifying that all segments are trending similarly. The June bright spots came in some of the lower volume segments with personal watercraft (PWC), Snow, RV and Marine. All four segments outperformed spring benchmarks in June.
Manage Your Inventory
How has the forecast changed? The answer is not much. While June started strong, pricing quickly faded with some additional softening in seasonally impacted regions of the country. With major retail markets in California, Texas and Florida experiencing unseasonably warm weather, expect floor traffic and door swings to be impacted by the hot summer ahead and continued economic headwinds. This compounds the growing issue of aging inventory sitting idle in dealerships. Without clear signals from the Fed on interest rate easing, “retailing our way out” of inventory may not be an option this summer. Our advice, as it has been over the last four to five months, is to move through inventory as aggressively as you can. Whether through retail or wholesale channels, find ways to limit aging and increase the velocity of inventory turn. As many dealers are discovering, the cost of holding inventory is the number-one factor eroding dealership profitability today. It’s crucial to be proactive in managing your inventory to mitigate potential losses.
