The Takeaway:

J.D. Power's (JDP) August 2018 Used Car And Light Truck Guidelines show that 2018 used vehicle prices through July are outperforming prices for 2014-2017 (Figure 1). Dealer demand for used vehicles to offset declining new sales is the primary factor driving used vehicle prices higher. The demand has been so strong that it has offset not only normal seasonal trends but also factors such as higher auction volumes and off-lease vehicles. JDP noted that Penske Automotive Group (PAG), Group 1 Automotive (GPI), and Sonic Automotive (SAH) all reported double-digit increases in used vehicle sales for 2Q18. Dealers' increased focus on used vehicle sales make it clear that used vehicle prices will experience only an average decline in 2018. If the demand persists beyond the summer months, price declines may be below average. Improved used vehicle prices are positive for Capital One Finance (COF), Ally Financial (ALLY), Santander Consumer (SA), Credit Acceptance Corp. (CACC), and Consumer Portfolio Services (CPSS).