Certified Pre-Owned

Dealers Rake in Healthy Used Sales to Close Q1

BANDON, Ore. - 

Tax season evidently helped the used-vehicle sales market rebound nicely as the first quarter closed.

CNW Research reported monthly used-vehicle sales surpassed 3 million units for the first time this year as analysts computed the March figure came in at 3.088 million. That figure represents a gain of more than 50 percent from February’s sales amount, which was 2.055 million.

“And it wasn’t just in the franchised channel. Independents and casual sales also showed significant 50 percent increases versus February,” CNW president Art Spinella said.

CNW determined franchised dealerships sold more than 1 million used vehicles in a month for the first time in 2014 as these stores turned 1.096 million units. Sales at independent dealerships also topped the 1-million mark. Private party transactions settled just below that threshold as the firm put the total at 985,316.

During his quarterly conference call on Monday, Manheim chief economist Tom Webb praised the used-vehicle sales performance dealers enjoyed in March, touching on some of the reasons why he believes the retail side is healthy.

“Dealers are turning auction purchases quickly on their retail lots and they’re turning them efficiently,” Webb said. “As a result, profits are very, very strong. Why is that important? Because the competitive nature of the market means that dealers will keep on bidding on units up and to the point that their margins are reduced to the minimally acceptable level.

“I would say given the continued improvement in the labor market, and more importantly, a very favorable retail credit environment, I do not expect these market fundamentals to materially change in the months ahead,” he continued.

That credit seemed to be available as the amount of subprime buyers who made a used-vehicle purchase thanks to an influx of tax-refund cash significantly in March.

CNW indicated the number of subprime buyers in March rose 17 percent versus year ago and soared 57 percent above the February figure.

Meanwhile, the firm noted that sales to consumers with FICO scores below 550 spiked 51.6 percent month-over-month. Sales to those deep subprime buyers also jumped 11.8 percent in March versus the same month a year earlier.

All told, CNW said about 3 percent more units were financed in March versus a year ago.

As an industry on a year-over-year basis, CNW determined that used-vehicle climbed 2.7 percent with franchised dealer sales units up 1 percent, independent dealer sales up 4.8 percent and private party transactions gaining 2.55 percent.

“But the good news doesn’t stop there,” Spinella said. “Franchised transaction prices rose a healthy 10.8 percent on the back of growing certified pre-owned units.

“Independents also saw an increase in transaction prices but at a more modest 1.52 percent versus year ago while private party sucked a lot of newer (15-plus year old) models off the market and was able to make a 5 percent increase in transaction prices,” he continued.

Spinella pointed out that the used-vehicle industry generated these sales numbers with 13 percent fewer used shoppers searching lots versus year ago, “indicating the pent-up demand log jam may well be breaking.”

Manheim Spots Leasing Impact Beyond Future CPO Inventory

ATLANTA - 

Manheim Consulting indicated new-vehicle leasing increased by more than 10 percent year-over-year during the first quarter, marking the eighth quarter in a row the market penetration rise has been by at least that amount.

During his quarterly conference call on Monday, Manheim chief economist Tom Webb explained how that development might be pointing toward another trend besides more potential inventory for franchised dealers to grow certified pre-owned sales.

“Interestingly, even though total new-vehicle sales in the first quarter were basically flat after a poor January and February, the retail lease penetration rate was up, and fleet sales were down. As a result, new-lease originations grew by more than 10 percent in the first quarter,” Webb said.

Because of what happened in Q1, Manheim slightly modified its off-lease volume estimates for 2015 and beyond, projecting the level could approach 3.5 million units five years from now.

Then, Webb dived back into what else growing lease penetration might mean.

“It should be noted that the increase in lease returns will approximate the increase the total increase in new-vehicle sales this year. Next year, I would fully expect that the increase in lease returns will likely exceed the increase in total new-vehicle sales,” Webb said.

“So what we have is what I would characterize is that we no longer have a new-vehicle market that is supported by pent-up demand. We have one that is supported by lease returns, and that’s a good thing,” he continued.

“But you all know I have my bias,” Webb went on to say. “If you consider that new vehicles are increasingly being bought by high-income households that do in fact want to trade on a regular cycle, then they should be in a lease and not a retail contract. Because remember, residual risk always has to reside somewhere. How better for that risk to reside with the lessor who has a portfolio of vehicles and hopefully has a professional remarketing arm.”

Even with the increase in off-lease volume, Webb pointed out that Manheim is forecasting that 2014 CPO sales are estimated to be greater than the total year-end off-lease supply. He noted that situation also unfolded in 2012 and 2013. Manheim’s data showed off-lease volume stood at about 2 million vehicles in 2011 with CPO sales settling a few thousands units below that figure.

When asked by Auto Remarketing, Webb discussed specifically when off-lease volume might increase as this year continues.

“It accelerates as the year progresses to the certain extent that new leases are sometimes written with contracts so they don’t come due in the weakest part of the cycle in November and December,” Webb said.

“There is still opportunities to pull leases ahead. I think you’re going to see more of that because the numbers are big and one of the advantages of leasing is that it maintains brand loyalty,” he continued. “By the same token, if you’re one of the other brands, you want to get it and capture that customer before they return back to that brand so you’ve got some marketing techniques you can use. And one of the strategies is pulling that lease ahead to capture the customer.”

CPO Sales Reach New Heights

WOODCLIFF LAKE, N.J.  - 

Notching an all-time high in March, the certified pre-owned market has just completed its best quarter ever, according to Autodata Corp.

Releasing monthly and quarterly CPO results Wednesday afternoon, Autodata said there were 206,409 certified sales in March, which was an 8.6-percent year-over-year increase.

This capped a record quarter, as 551,707 certified cars were sold (up 10.9 percent year-over-year), according to Autodata.

Domestic brands sold 71,103 certified vehicles in March (up 12.4 percent) and 196,074 in Q1 (up 18.1 percent). Asian brands moved 99,363 CPO vehicles for the month (up 4.8 percent) and 261,718 units for the quarter (up 6.6 percent).

European brands sold 35,943 CPO cars in March (up 12 percent) and 93,915 for Q1 (up 9.1 percent).

 

March CPO Sales Start to Roll In

CARY, N.C.  - 

The first quarter of 2014 is now officially in the books, and with that, a few automakers have shared their Q1 certified pre-owned results this morning.

Starting with Hyundai, it achieved its best-ever month for CPO, selling 8,484 units. This marked the first time it has sold more than 8,000 certified cars and is a 26.3-percent year-over-year hike.

Through three months, Hyundai has sold 22,348 CPO vehicles (up 26 percent) and 686 Hyundai dealers have sold at least one certified car this year, officials noted.

Mazda also reported a best-ever month, selling 4,336 vehicles. This beat the old record set in August, when Mazda moved 3,667 CPO cars. Mazda sold 3,390 certified vehicles in March 2013.

For the first quarter, its certified sales were at 10,216 units, versus 8,588 in the same period of 2013.

Meanwhile, Ford’s brands combined to sell 24,785 certified vehicles in March and have moved 63,860 certified vehicles so far this year.

Breaking down that total, there were 2,366 Lincoln CPO sales in March and 5,912 in Q1.

There were 22,419 Ford/Mercury certified sales for the month and 57,948 for the quarter.

Next up, Audi sold 3,886 CPO vehicles last month, compared to 3,425 in March 2013.

Its first-quarter certified sales came in at 10,314 units, versus 9,054 in Q1 a year ago.

Volkswagen moved 8,281 certified units in March, down 9.3 percent year-over-year. For the first quarter, CPO sales totaled 21,471 units (down 9.6 percent).

That said, VW noted that March was still its sixth-best certified month ever and marked the eighth time the company has sold more than 8,000 CPO cars in a month.

Volvo’s 1,119 certified sales in March were a 9-percent improvement over the year-ago time frame.

It moved 2,801 CPO cars in the first quarter, down 0.8 percent from Q1 2013.

Over at Mercedes-Benz USA, the company reported that the Mercedes-Benz Certified Pre-Owned program had 9,757 sales in March (up 12.5 percent year-over-year) and 28,050 sales in the first quarter (up 15.1 percent).

Finally, there were 988 Porsche Approved Certified Pre-Owned vehicle sales in the U.S. last month.

Stay tuned to Auto Remarketing this week for more CPO sales results from March and the first quarter.

PREVIEW: Balancing Recon Costs in CPO

CHANDLER, Ariz. - 

Though used prices are falling, rates are still high in the lanes — especially when dealers are looking to secure quality vehicles for their certified pre-owned operations programs.

With used prices remaining above average, it is crucial that dealers balance their reconditioning costs with profit potential.

To get an idea how some of the most successful dealers in the U.S. are tackling this concern, Auto Remarketing reached out to Bob Colabianchi, general sales manager at Chapman BMW. Chapman BMW was also recently featured in Auto Remarketing’s “Best CPO Dealers in the USA.” The dealership came in as the No. 3 top selling certified dealer for BMW with 1,455 certified units sold in 2013.

Colabianchi covered what makes a vehicle certifiable, things to consider when trying to convey the value of a certified ride to customers, Chapman’s CPO reconditioning process and more:

AR: Walk me through your reconditioning process for a CPO vehicle.

Colabianchi: Our sales manager is involved with the entire process. The CPO sales manager does a walk-around with the technician during the inspection process.  Reconditioning starts with our certified sales manager completing the vehicle information portion of the CPO inspection, inputting the vehicle into BMW’s system and verifying the maintenance and history are compliant with BMW’s CPO guidelines. 

AR: What makes a vehicle worth certifying?

Colabianchi: The only factor for a vehicle to be in the CPO program is the ability to meet BMW’s guidelines. If we can certify a vehicle, we do. 

AR: On the other hand, name a few things that may move you to wholesale a vehicle rather than certify. What are the deal breakers?

Colabianchi: Any derogatory history is the deal breaker. We review Carfax history, service history and internal history. If we have negative internal history or body shop repairs not listed on a Carfax, we wholesale the vehicle.

AR: How much CPO reconditioning gets outsourced, and how much goes to your dealership’s service department?

Colabianchi: All reconditioning goes through the service department.  Any dent, glass or touch up is performed by long-term venders for a reduced rate and charged to the car through the service department. 

Editor's Note: To read the entire Q&A, see the March 15 print and digital editions of Auto Remarketing, which focuses on Fixed Ops: Top Trends & Best Practices.

2 Elements Trigger ‘Atypical’ Price Movement

CARMEL, Ind. - 

ADESA’s Tom Kontos pointed to two factors as to why February’s wholesale price movement ended up being “atypical.”

According to ADESA Analytical Services’ monthly analysis of wholesale used-vehicle prices by vehicle model class, used vaules in February averaged $9,839 — down 1.4 percent compared to January, but up 0.9 percent relative to February of last year.

Kontos mentioned in his monthly commentary that compact cars and vans, which are popular rental and fleet vehicles, were the only segments that had both monthly and annual price gains.

“Wholesale prices were down in February versus January, a-typical of their seasonal pattern, but were up modestly on a year-over-year basis, despite continued wholesale supply growth coupled with weaker retail demand limited by severe weather conditions,” Kontos said.

“This unusual pattern would indicate that dealers were fairly aggressive in proactively bidding in-lane and online for the vehicles they need for the budding spring market, especially highly certifiable off-rental program vehicles remarketed by auto manufacturers,” he went on to say.

ADESA indicated prices for used vehicles remarketed by manufacturers moved up 1.3 percent month-over-month and 6.3 percent year-over-year. Kontos reiterated that manufacturers capitalized on strong demand for certifiable units.

Analysts also mentioned prices for fleet/lease consignors softened 0.5 percent sequentially, but climbed 1.1 percent annually.

Furthermore, ADESA noted dealer consignors saw a 1.1-percent average price increase versus January and a 0.9-percent uptick versus February of last year.

Kontos wrapped up his commentary by recapping CNW Research information that indicated retail used-vehicle sales dropped 15.6 percent month-over-month “as severe weather again negatively impacted auto shopping.”

Meanwhile, Kontos mentioned Autodata Corp. information that showed sales of certified pre-owned vehicles in February rose 7.7 percent above the prior month and 14.1 percent above the prior year

“The strong certified sales may have been a factor in strong pricing for off-rental program units sold by the manufacturers,” he said.

ADESA's Wholesale Used-Vehicle Price Trends
  Average Prices ($/Unit) Latest Month Versus:
  Feb-14 Jan-14 Feb-13 Prior Month Prior Year
           
Total All Vehicles $9,839 $9,983 $9,747 -1.4% 0.9%
           
Total Cars $8,776 $8,869  $8,854 -1.1% -0.9%
Compact Car $7,130 $7,010 $6,910 1.7% 3.2%
Midsize Car $8,140 $8,258 $8,262 -1.4% -1.5%
Fullsize Car $6,889 $6,771 $7,413 1.7% -7.1%
Luxury Car $11,999 $12,209 $11,963 -1.7% 0.3%
Sporty Car $12,002 $12,343 $12,144 -2.8% -1.2%
           
Total Trucks $10,239 $10,438 $9,531 -1.9% 7.4%
Mini Van $7,609 $7,448 $6,910 2.2% 10.1%
Fullsize Van $10,907 $10,341 $9,952 5.5% 9.6%
Mini SUV $11,988 $11,987 $10,993 0.0% 9.1%
Midsize SUV $7,324 $7,503 $6,560 -2.4% 11.6%
Fullsize SUV $10,652 $10,981 $10,130 -3.0% 5.2%
Luxury SUV $18,210 $18,941 $18,583 -3.9% -2.0%
Compact Pickup $7,260 $7,362 $7,459 -1.4% -2.7%
Fullsize Pickup $12,460 $12,632 $11,532 -1.4% 8.0%
           
Total Crossovers $12,615 $12,768 $13,398 -1.2% -5.8%
Compact CUV $11,480 $11,553 $11,873 -0.6% -3.3%
Mid/Fullsize CUV $13,791 $13,999 $14,916 -1.5% -7.5%

KAR Auction Services Amends and Restates Credit Agreement

In other company news, ADESA parent KAR Auction Services announced Tuesday that it amended and restated its credit agreement dated as of May 19, 2011.

Officials explained the term loans under the original credit agreement have been repaid in full and terminated, and refinanced with a $650 million three-year senior secured term loan B-1 facility and a $1.120 billion seven-year senior secured term loan B-2 facility.

In addition, KAR noted the amended and restated credit agreement also established a five-year $250 million revolving credit facility in place of the previous revolving commitments. The interest rate of term loan B-1 was reduced to LIBOR plus 2.50 percent.

The company computed the interest rate of term loan B-2 remains at LIBOR plus 2.75 percent but the LIBOR floor was reduced to 0.75 percent.

“The reduction in pricing is expected to save the company an annualized amount of approximately $9 million in cash interest,” KAR said. “The revolving commitments may be used for ongoing working capital needs and general corporate purposes for the company and its subsidiaries. The company has not drawn any amounts under the revolver.”

Slew of Imports Show Double-Digit CPO Spikes

WOODCLIFF LAKE, N.J.  - 

It was another solid month of certified pre-owned sales for import automakers, as Asian brands increased their CPO business by 9 percent, and European brand sales were up nearly 14 percent, according to Autodata Corp.

More specifically, Asian brands moved 83,337 CPO units in February (up 9 percent year-over-year), and they have sold 162,408 certified vehicles through two months of 2014 (up 7.7 percent).

There were 30,382 CPO sales by European brands last month (a 13.7-percent hike) and 57,976 in January and February combined (up 7.4 percent).

Asian brands took 46.5 percent of the CPO market last month, compared to 48.7 percent in February 2013, while Europeans were steady at 17 percent in both periods, Autodata indicated.

There were several import brands who increased their certified sales by double-digit percentages in February, including these highlights, just to name a few:

— A  44-percent year-over-year lift from Subaru with 3,345 sales
—The Nissan brand boosted its sales by nearly 22 percent with 10,359 units sold, and Infiniti climbed 49 percent with 1,259 sales.
— A 32.4-percent increase by Mercedes-Benz, which sold 9,977 CPO vehicles
— Kia increased its sales 64.7 percent and moved 3,464 certified vehicles.
— Nearly all Asian brands increased their CPO sales, most by double-digit percentages. The majority of Europeans were up, as well, again several seeing double-digit spikes.

 

21-Percent CPO Sales Lift for Big 3

WOODCLIFF LAKE, N.J.  - 

The Big 3 increased their certified pre-owned sales by more than 21 percent in February, pulling in 65,323 CPO sales and lifting their market share to 36.5 percent for the month, according to Autodata Corp.

In February 2013, domestics sold 53,799 certified vehicles and commanded 34.3 percent of the CPO market.

Year-to-date sales for the Big 3 are just under 125,000 units, up 21.7 percent from the year-ago period.

The biggest sales increase for the month among the three Detroit automakers was at Chrysler Group, where its brands combined to sell 11,506 units for a 23.3-percent year-over-year gain. In two months of 2014, it has sold 22,232 CPO units (21.7 percent)

The Dodge brand led the way in February with 5,383 certified sales (up 19.8 percent), Jeep moved 3,923 CPO vehicles (up 35.8 percent) and there were 2,200 Chrysler-brand CPO sales (up 12.9 percent).

The Fiat band, whose sales are not included in the aforementioned results, saw 26 CPO sales for the month.

At General Motors, its Buick, Chevrolet, GMC, Pontiac and Saturn CPO sales totaled 32,069 for the month (up 19.1 percent) and 60,577 year-to-date (up 19.7 percent).

There were 1,549 Cadillac certified sales in February (up 7.6 percent) and 3,086 through two months of 2014 (up 8.2 percent).