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Used-Car Values Beat U.S. Home, Stock Prices: Chart of the Day

Americans dealing with plunging home values and stock-market swings can take some comfort in knowing their used cars and trucks are likely to fetch record prices.

The CHART OF THE DAY compares the Manheim Used Vehicle Value Index, derived from wholesale prices, with the Standard & Poor’s/Case-Shiller 20-city housing index and the S&P 500 Index for the five years ended in May.

Manheim Consulting’s index, adjusted for changes in the mix and mileage of used vehicles along with seasonal sales patterns, gained 13 percent in the five-year period. The S&P/Case-Shiller index dropped 33 percent, while the S&P 500 tumbled as much as 47 percent before rallying. Last month’s reading for the used-car and truck gauge was the highest since data began in 1995.

“Pricing is being driven in part by rising demand at auction from franchise dealers” responding to relatively low inventories of new cars and trucks, Ryan Brinkman, an analyst at Goldman Sachs Group Inc., wrote yesterday in a report.

Copart Inc. and KAR Auction Services Inc. are among the beneficiaries of price increases, he wrote, because both auto-auction companies receive a percentage of the sale price on the vehicles they handle. Brinkman has a “buy” rating on Copart and a “neutral” rating on KAR.

Higher prices are a double-edged sword for CarMax Inc., the largest U.S. seller of used vehicles, he wrote. While they bode well for the company’s wholesale and finance units, they may hurt earnings at its dealerships. The dealers generate about two-thirds of gross profit at CarMax, also rated “neutral.”

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