Some stabilisation at last

In July, TransUnion Auto Information Solutions released their latest Vehicle Pricing Index (VPI), which is published quarterly and measures the year-onyear price inflation of a market weighted basket of new and used vehicles. The latest report held some good news for browbeaten consumers, indicating that new and used car inflation remained behind the Consumer Price Index (CPI) in the second quarter (Q2) of this year. The VPI puts new car inflation at 4% for the period April – June 2011, marginally up from 3.7% in the first three months of the year. At the same time, used car price inflation slowed from 3.4% in the first quarter of the year to 3.1% in Q2 - the slowest rate of increase since 2009, when used car price deflation was a regular occurrence. The CPI on the other hand climbed to 4.6% in May from 4.2% the month prior. At the time of the report’s release, June CPI statistics had not been released. Mike von Höne, TransUnion CEO, explained that despite the disruption of the Japanese vehicle manufacturing sector following the earthquakes and tsunami, this had no impact on local new vehicle sales or pricing. He continued: “There have been some delays in component availability, which affected local manufacturers’ ability to produce new vehicles, but this situation is not expected to continue for much longer.” The report does however see continued pressure on the used vehicle market, thanks in large part to the drop in new vehicle sales in 2009 and 2010. This resulted in lowered numbers of one and two-year-old models available for resale. Concurrently, new car inflation rates have fallen from over 10% in 2009 to under 5% last year and into the first half of 2011. This resulted in a narrowing of the price gap between new and used cars. As von Höne explains: “The shortage of quality, late model used cars on the market, combined with the many excellent ‘deals’ that are available from manufacturers on new cars, has led to declining demand for used vehicles.” It was for this reason that the ratio of used to new cars financed has dropped from 1.95 used cars for every new car financed in Q1 this year, to just 1.63. Despite this, the number of used vehicles financed in Q2 was up 24% from Q1.

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