While 2009 was one of the best years on record from a realized pricing standpoint it ended with atypical wholesale market conditions, and the performance of the retail market will determine how the 2010 wholesale market shapes up, according to OPENLANE's Nagi Palle.

Nalle described 2009 as the "perfect storm" for the wholesale market, due to a combination of weak new vehicle retail sales accompanied by a relatively strong used-car retail market. Fewer new car trade-ins led to a greater demand for wholesale units at auction, with many dealerships beginning 2009 with very healthy used car supplies, but as the used-car retail market grew, supply began falling with steep declines during the summer, benefitting auction places.

Highlights from 2009 include:

• Prices began rising in January and did not soften until October, and then only slightly. For the year, wholesale prices ended up over 20 percent higher in December 2009 compared to January 2009

• Pricing in all vehicle segments was up significantly

• Short supply of wholesale vehicles led to record conversion rates in the industry - especially from late spring to late summer

• Year-over-year volumes were lower through the summer (given high days supply) but began to increase in early summer once the days supply began to decline with auction volumes hitting a peak in August 2009

Looking Ahead to 2010: Expect Some Market Adjustments

2009 ended with atypical wholesale market conditions, and 2010 is also beginning with such conditions. These will have implications for both pricing and volume expectations for both sellers and buyers. It will be important throughout 2010 to recognize that "typical" expectations may not be valid.

Palle expects the retail markets to be the most important determinant of how the 2010 wholesale market will shape up, with the U.S. (and global) macro-economic improvement playing the biggest role.

Key differences between beginning of 2010 and beginning of 2009 include:

• New-vehicle retail market is currently picking up and expected to grow in 2010 - trade-in volume at dealerships should improve. The used-car retail market is expected to remain flat in 2010 relative to last year.

• Pent-up consumer demand for vehicle purchases is approximately 50 percent lower than at the beginning of 2009. Lower pent-up demand will put some pressure on the retail market, unlike in Q1 2009 when the year began with a very depressed used-vehicle retail market.

• Wholesale vehicle prices have risen 20 percent over 2009 and did not show the typical seasonal decline in Q4 2009. Accordingly, price movement (increases) in 2010 cannot be expected to demonstrate typical seasonality, given the starting prices are relatively high already.

• Off-lease volumes will begin to decline in late Q4 creating pressure on used-vehicle supply.

December U.S. and Canadian Trends

Overall U.S. sales prices remained steady in December, with prices softening slightly during the second week of the month, but leveling off thereafter. Prices for trucks and minivans strengthened, while car and SUV prices declined. There was a slight increase in dealer interest in cars and trucks, with declining interest in SUVs and minivans.

Overall Canadian sales prices showed a slight softening in the beginning of December, then fell sharply in the last week, ending 15 percentage points below November. Prices dropped across all body style segments throughout the month, but dealer interest increased in all body styles except cars.