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Manheim: New Model Focus Causes Softening of Wholesale Market

August 8, 2006

Tom Webb, Manheim's chief economist, reports that dealers shifted their focus to moving new vehicles in July before 2007 models hit the stores, leading to a softening in the used vehicle market and wholesale prices, according to AutoRemarketing.com.

Webb attributes the softness in wholesale used prices in July to a general weakness in the retail used vehicle market, an overall slowing in the economy and a need to move new vehicle inventory before 2007 models arrive.

Manheim's Used Vehicle Index came in at 111.4 for the month, down 1.3 percent from June, said Webb. He notes that the year-over-year change in the index improved 2.4 percent because wholesale values fell even more steeply last July, due to employee pricing.

Used sales for franchised dealers declined 21 percent, and independent dealer sales decreased 10 percent for the month, according to CNW Marketing/Research data. On a year-to-date basis, franchised dealers' used sales were down 9 percent, while independent dealers' used sales were down 5 percent, AutoRemarketing.com reports.

Webb says dealers have too much of what people don’t want and too little of what they do. He warns dealers to expect more pricing pressure in the already weak segments of the market, with compact and midsize vehicles continued to maintain strength (up 8.7 percent and 5.4 percent, respectively) while full-size and luxury SUVs suffered (down 10.3 percent and 6.4 percent, respectively).

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