"The marginal price decline in March was not significant," said Jonathan Smoke, chief economist for Cox Automotive, parent company of Manheim. "The slight decline in the seasonally-adjusted index value was the result of the adjustment process expecting more of an increase in March, but delays in tax refunds have shifted the peak of used car demand by several weeks. Looking ahead, we are expecting strong pricing in April and May, as tax refunds more fully impact the used-car market."

Correlating the Used Car Market with the Tax Calendar
Historically, used-car sales in the U.S. have peaked in the weeks following the peak in tax refunds. Starting in 2017, however, the IRS delayed the point when households with eligible tax credits could file tax returns. This resulted in refunds being delayed by approximately 4 weeks, impacting used-vehicle sales and pricing. This same situation is impacting 2018 as well.  

Since 2009, the average March increase relative to February in the Manheim Used Vehicle Value Index has been 3.5 percent, just slightly higher than the March 2018 unadjusted increase of 3.4 percent. The historical bump in March pricing has been driven by an increase in used-car demand driven by earlier tax refunds. The seasonal-adjustment process still expects to see this historical pattern in used-vehicle values. As a result, the seasonally adjusted value for March registered the slight 0.15 percent decline.

Through the week of March 23, the cumulative number of refunds in 2018 is down 1 percent compared to 2017. The weekly trend in refunds, however, relative to last year, is now trending up, with experts predicting a stronger price trend in April as retail used-car demand will likely peak for the year.

U.S. Vehicle Sales
Used-vehicle sales in March increased 1 percent over year-ago levels, according to Cox Automotive estimates, with the month's seasonally adjusted annual rate (SAAR) for used vehicles rounding out at 39.5 million units.

New-vehicle sales increased 6 percent year-over-year in March, coming in far stronger than forecast and surprising most analysts and experts. The March 2018 new-vehicle SAAR of 17.4 million, up from 16.7 million in 2017, marked the seventh straight month of more than 17 million SAAR and the third best March on record.

Cars continue to experience sharp declines in the market, with sales last month falling 9 percent compared to year-earlier levels. Trucks and SUVs continued to gain share.   

Used-Vehicle Pricing Trends: Up Across the Board
Every vehicle segment posted wholesale price increases compared to last year, with an especially strong gain once again in vans. First quarter wholesale price trends for all segments included:  

• Compact Car prices represent significant strength, with a 5.4 percent increase over 2017 – even more than the typically strong SUV / Crossover segment.

• Midsize Car segment was the weakest performer, but unlike previous quarters the segment did not experience a decline, posting instead an increase of 0.9 percent over 2017.

• Pick-ups and Vans both showed strength, with vans increasing significantly with a 13.4 percent gain compared with March of last year; pick-ups had a comparatively modest increase of 5.5 percent.

• SUVs and Crossovers wholesale pricing underperformed the overall market, increasing 5.1 percent from last year; the underperformance is likely due to an increasing supply of used SUVs and more aggressive pricing and incentive spending on new inventory.

• Luxury Car values once again underperformed the overall market, increasing 4.1 percent over the same period last year.

Rental-risk pricing strengthened in March, with the average price for rental-risk units sold at auction up 7 percent over last year and 4 percent compared to February. The average mileage of 45,000 for rental-risk units in March was 13 percent higher than last year.

Trends & Economic Momentum
The fourth quarter's real GDP growth rate was revised upward to 2.9 percent from its previous 2.5 percent. Expectations remain for a continuation of accelerated growth this year due in part to increased consumer spending and business investment resulting from recent tax reform. Despite consumer confidence last month experiencing a moderate decline from a 17-year high in February, largely due to stock market volatility, consumer spending expectations remain high due to tax cuts, strong wage growth and the robust labor market.