ATLANTA — Wholesale used-vehicle prices increased 2.6% month over month in May and 2.8% from a year ago, bringing the Manheim Used Vehicle Value Index to a record 127.9.

On a year-over-year basis, the mid-sized car category registered the steepest decline (down 2.4%) in May, while pickups and vans recorded gains greater than the overall market.

“The May index result challenges concerns that increasing wholesale supplies from near peak off-lease volumes and rising rental volumes would lead to rapidly declining used-car values,” the firm stated in its release. “Indeed, the opposite appears to be happening. Higher commercial volumes at auction are providing the used-vehicle market with quality and choice that offers a compelling value to consumers.”

And dealers responded to consumer demand for used vehicles by purchasing the most vehicles at Manheim for the month of May since 2008. Year-over-year growth in sales outpaced the growth in inventory, which helped push the firm’s index to a record high. A slightly younger mix of vehicles also likely contributed to the record index level.

The index registered its record reading as the new-vehicle market continues to struggle. Franchised dealers have had more than four million new units in stock for the last four months, with May’s new-vehicle sales volume slipping 0.5% from a year ago — even with one extra selling day compared to May 2016. New-vehicle sales are down 2% year to date compared to a year ago.

Combined rental, commercial, and government purchases of new vehicles were down 15%, due primarily to a sharp decline in rental sales (down 24%). Retail sales were up 3% in May, helping push retail sales into slightly positive territory for the year (0.1%).

Certified pre-owned sales also strengthened in May. Registration data indicates that used-vehicle sales were weak in the first quarter, but wholesale buying trends and CPO sales in May point to improving momentum.

And according to Manheim, CPO sales ticked up sharply in May (7%), leading to a year-to-date gain of 1.6%. CPO sales of light trucks jumped 16% as increasing off-lease SUV/CUV/pickup inventory lines up well with consumer demand. The passenger car share of CPO sales came in at 49% for May, as SUV/CUV/pickups began to dominate just as they have since 2013 in the new-vehicle market.

Additionally, the average price for rental risk units sold at auction in May was down 2% year over year. Rental risk prices were down 1% compared to April.

SUV/CUVs accounted for 29% of rental risk sales in May vs. the year-ago period. The share of compact cars fell from 31% to 27%, while the average mileage for rental risk units in May (at 38,900 miles) was 9% from a year ago. 

“Consumer confidence remains near a 16-year high, according to the May data from the Conference Board. Consumers remain positive about the economy due to strong labor conditions that are resulting in earnings’ rising faster than inflation,” the firm stated in its report. “Likewise, stock indices and home prices continue to support growth in household wealth. The unemployment rate in May fell to 4.3%, a 16-year low.”