Used car prices versus S&P 500

By Prieur du Plessis, on April 15th, 2009 posted in: Investment, Markets, Money

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The following interesting snippet comes courtesy of Bespoke:

“The Manheim US Used Vehicle Value Index, which measures wholesale used vehicle prices, was up 8.27% in the first quarter of 2009. As shown in the first chart below, this is the biggest quarterly increase in the history of the index going back to 1995.

“Manheim gives the following reasoning for the spike in used car prices on its website: ‘The strength in auction pricing has been the result of the reduced supply that is normally generated by trade-ins on new vehicle sales, the substitution effect from new to used vehicle purchases, a strong tax refund season, and some easing in the availability of retail financing. The supply reduction caused by the unprecedented steepness at which new vehicle sales have fallen will have long-term effects as well as the immediate impacts being noticed today.’

“In the second chart below, we compare the used car index to the S&P 500. Regardless of the reason for the spike in used car prices, the index has historically tracked US equity markets pretty closely. But based on the chart, the index seems to lag the markets at peaks and troughs. However, it’s a good sign that the used car price trend is now moving upward instead of downward.”