OPENLANE Forecasts 2010 Market Trends

December 16, 2009

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MENLO PARK, Calif. — Describing the future used-vehicle sales trends, OPENLANE's Nagi Palle offered several predictions for 2010.

The company's vice president of analytics expects the market to maintain a similar pace next year as it did in 2009. Meanwhile, he said the new-vehicle sales market should make modest increases in 2010, but still lag significantly from pre-2009 levels.

"Headwinds from diminished vehicles per household and a lower pent up demand going into 2010 will create resistance to the new-car market breaking free," Palle contended.

The combination of factors within the new- and used-vehicle retail market prompted Palle to forecast strong demand to drive the wholesale market throughout 2010. He specifically mentioned how the reduction in trade-ins and an overall sluggish new-vehicle market are two primary wholesale demand drivers.

"The wholesale vehicle supply chain will continue to evolve to provide inventory at the right time and place and price," Palle explained.

"Constrained supply from trade-ins as well as lower supply volumes, overall, will make online channels for acquiring used-vehicle inventories very attractive. Consignors will look to redistribute inventory where there is greatest demand — and hence healthiest pricing — without moving the vehicle from its location," he went on to say.

"Hence, it will minimize total operating cost as well as generate the highest auction prices for their inventory," Palle added.

Mentioning time elements in his wholesale market discussion, Palle indicated that he expects demand to be especially strong during the first three quarters of 2010. Furthermore, he pointed out that off-lease volumes could dwindle during the last quarter of the year.

"Overall, lower new car volumes will lead to lower supply of rentals/fleets and repossession units in general," Palle pointed out.

In response to a demanding wholesale market, Palle predicts that dealers will likely turn to online auctions even more in the coming year. He cited estimations by the Boston Consulting Group that forecasts online auction penetration to reach 15 percent by 2013.

Basically, that growth stems from online auctions incorporating more attributes of physical locations, such as pre- and post-sale inspections, multiple floor planning options, end-to-end transportation solutions and GPS tracking.

With the number of dealerships shrinking nationwide, Palle noted that surviving stores will continue to look to online resources beyond wholesale auctions. He said innovative online tools to move vehicles will be even more vital to dealers next year.

And in a complementary role, Palle noted that analytics and market trending will be critical knowledge for dealers, auctions and all other related industry entities.

"Pricing models will become more dependent on these market trends for accuracy," he stressed.

Finally, Palle emphasized a long-standing element of the remarketing industry that will continue to be crucial for productivity in the coming year.

"Customer service will continue to be a very high priority for dealers to retain valuable customers," Palle indicated.

"As such, dealers will look to their automotive partners to provide more efficient, cost and time effective ways of doing business," he concluded.

Auction/Wholesale