The Value #31: CBB Index – June 2020 Values Remaining Flat Some Segments Gain – Not Expected to Last

July 08 2020

Also in this issue of The Value:

The year 2020 so far can be creatively described in a number of ways - predictable is mostly certainly not one of the possible adjectives. To use an obvious cliché, it has been a roller coaster for the auto industry as the entire nation perseveres and works diligently to cope with the public health and economic crisis at hand. This rocky journey is clearly reflected in our Used Vehicle Value Retention Index each month and the month of June is no exception.

June 2020 Canadian Black Book Used Vehicle Value Retention Index

Canadian Black Book’s Index, which measures the actual retained value of 2-6 year old vehicles in the Canadian wholesale market, clearly shows the volatility at hand. Early in the COVID crisis, with so much uncertainly in the day to day operations of wholesale and retail in the industry, values in our index fell by 7.8 index points from February to May, or by 7.2%.

For June the trend has made a significant change. The index has halted its decline and remained flat with a change of 0.01%, essentially unchanged from May’s mark. We have seen stronger values, especially in the last few weeks of the month of June. Unfortunately, this strengthening of the market is expected to be temporary. During March, April and a portion of May the car market in Canada was in upheaval and essentially on pause. There was very little in the way of trade-in activity, lease returns, repossessions, and wholesale activity. These are the key means of creating used car supply in Canada. These earlier supply restrictions are now fueling some stronger prices as the market works to meet pent-up demand from earlier in the year.

Compared to May, there were a number of segments that showed considerable strength and improved retained value performance. The Sporty Car segment led the way with a 3.4 Index point increase, followed by Premium Sporty Car with a surge of 2.5 points. This is not surprising given that we are in the midst of the prime season for sportier products. Full Size Car rounds out the top three segments, which saw an increase of 1.9 points.

Not all the segments enjoyed gains in retained value for June. The large SUV/CUVs struggled again this month. The Full-Size SUV-CUVs fell by 4.2 Index points and the Mid-Size Luxury CUV/SUV were down by 2.4 points. Compact Vans, which is largely a commercial vehicle segment, fell by 3.4 Index points.

Compared to June of 2019, June 2020 results show increases for Sub-Compact Cars at 2.0 Index points and Full-Size Vans at 2.0 Index points are the largest positive shifts. Conversely, Compact Vans were not up in value but at -0.5 they were the smallest of the decliners.

The three largest decliners since June of 2019 all fell by similar amounts. The Full Size Luxury SUV/CUV -have fallen by 10.6 points in the last twelve months, followed closely by the Minivan segment at -10.5 points. The very popular, yet highly competitive Compact SUV/CUV segment declined by -10.4 points. These are massive declines. Some of the decline is brought about by shifts in market tastes and competition, however, most can be attributed to the destabilizing impact of the global pandemic.

Looking forward to the second half of 2020 we do expect more declines overall as consumer demand remains uncertain, due to the current COVID-19 induced recession.