While dealers and manufacturers are celebrating increased numbers early this season, the added business seems to be negatively impacting the price of used RVs sold at auction.
Dealers, who participate in auctions as both sellers and buyers, have flooded the market this spring with used units. From February to March, the number of travel trailers sold at auction rose 40 percent and the number of motorhomes rose 10 percent, according to Black Book market data.
“Right now we’re seeing an overflow of inventory showing up at auction, and I’m not 100 percent sure why that is, but we’re getting them in and we’re moving them quick,” ADESA National Specialty Representative Al Kelly said.
The increased supply appears to be the primary reason that prices of used RVs have fallen in recent months.
Travel trailer prices at auction dropped 4.1 percent from February to March, while motorhome prices dropped 2.4 percent. Travel trailer prices historically have risen during that period over the previous five years. Motorhome prices rose from February to March four of the previous five years.
The price of travel trailers at auction dropped in March after rising over that same period the previous five years. Images courtesy of Black Book. Click to enlarge.
Like much of the RV business, prices in the used RV market are seasonal, and while they show clear trends, it is difficult to say for certain what drives the price one way or another.
While he notes that March numbers are unusual, Black Book’s Eric Lawrence stopped short of saying it was a trend.
“I hate to make a blanket statement because we only have one month of data,” Lawrence said. “There could be any of a number of weird little factors that, for whatever reason, push the price down.”
Kelly agreed that it’s difficult to pinpoint which factors influence the price, he said that there are a few basic business principles at play.
“It’s just like anything else,” Kelly said. “It’s supply and demand and the availability of money.”
As bankers loosen purse strings, more money flows into the market, allowing dealers to fill their inventory, Kelly said. But in recent months, both supply and demand have risen steeply.
Auction prices for motorhomes have steadily declined in recent years. Click to enlarge.
Many of the units sold at auction are bank repossessions, with dealers, insurance companies and occasional independent sellers rounding out the field, according to Kelly.
The trends at auction are similar to other trends in the RV industry. Prices tend to rise before the spring and summer and level off or drop in late winter months.
In the winter, for example, demand from dealers drops and the number of repossessions rise, which is often reflected in lower prices throughout the winter.
Typically there will be more repossessed units sold in the winter months, according to Kelly.
“People pay for what they’re using,” he said. “During the summer time they pay for their RVs and in the winter they don’t.”
With slower dealer demand during the winter months, prices often dip.
Kelly suspects the increased supply of used units this spring has come at the hands of dealers, who may be trying to clear old units off their lots.
“People are able to borrow more money, so they’re buying more units,” Kelly said. “Used inventory is rising and auction is the best place for dealers to get rid of the used inventory they have coming in.”
He thinks this increased supply has driven the price down unexpectedly, though he admits that it’s hard to say for certain.
“(The price) is one of the hardest things to explain,” Kelly said. “I still don’t completely understand how it changes so easily.”