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THE team which created Manheim’s new Market Intelligence project, and the database which underpins the valuation platform, has not only created a residual-values projection engine but has also created the Manheim Used Vehicle Value Index for the Australian market which shows trends in wholesale prices going back to 2006.

Working with a team in Manheim’s global chief economist’s office in Atlanta, they have established an Australian equivalent of the well-known US Index – a long trusted gauge of upswings and downturns in used- vehicle prices which is commonly quoted by CNBC, the Wall Street Journal and other mainstream US publications.

The Manheim Used Vehicle Value Index (MUVVI) in the US is updated monthly using sales data from Manheim which captures data from its extensive wholesale used-vehicle marketplace and auction network.

By applying statistical analysis to its database of millions of used- vehicle transactions, Manheim has developed a reliable measurement of used-vehicle prices that is independent of underlying shifts in the characteristics of vehicles being sold.

Plant closure impact

Brenton Barnes, Manheim’s data & market intelligence product manager, told GoAutoNews Premium that the Index in Australia will help Manheim to have more informed discussions with its customers and prospects about the state of the used car market and where prices might be headed in the future.

“For instance, if a customer wanted to understand the impact of an economic shock on used car prices, Manheim can analyse what happened to prices during similar events in the past,” he said.

“The index also gives our customers the ability to manage buyer and seller expectations by highlighting the apparent seasonality in used vehicle values, historical past performance and trend lines. It is also helpful when it comes to assisting customers with setting residual values.

“Our new Index has a number of useful applications for automotive industry. It has been useful for validating the opinions buyers and sellers have about the used car market and in some cases addressing misconceptions.

“For example, from time to time we hear comments like ‘used car prices increase during a recession’. The theory goes that in a recession, would-be new car buyers settle for a used car or demonstrator – pushing up prices.

“The reality is, during the global financial crisis all asset prices suffered. We found used vehicle prices fell 17 per cent below their long run average.

“The index has also been useful in highlighting trends in major vehicle segments. For instance, the index was useful in measuring spikes in sales prices for large vehicles at around the time of the Ford and Holden plant closures.

“When Ford ceased domestic manufacturing in October 2016, large car prices spiked to 19 per cent above their long run average and when the Holden closed their South Australian plant in October 2017 prices rose to 20 per cent above the long run average before normalising again.

“The frustrating thing is that had we have had the Index at the time of the Ford plant closure we could have seen the pattern of values rising in the lead-up to the closure and then falling again and predicted that it would happen again when the Holden plant closed.”

Mr Barnes said the base for the Index is January 2006.

“The lowest point of the Index was during the global financial crisis although the drop in values did not last and had recovered significantly by the end of the year,” he said. “That could have been due to many leasing companies electing to roll over their leases on existing cars and this would have constrained supply of cars into the used vehicle market.”

Manheim will commence publishing results of the Index each quarter.

By John Mellor

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