Pricing

Dealertrack's top-funded cars experience year-end price gains

MISSISSAUGA, Ontario - 

At the close of 2017, Dealertrack Canada saw significant annual price gains for used vehicles in its network.

The Average Cash Price of the Top 10 Funded Used Vehicles in its online credit application network rose by 5.23 percent compared to 2016, according to the company.

Like in November, nine of the 10 top vehicles experienced gains last month.

Up 13.50 percent, and with an average cash price of $14,019, the 6th-place Chevrolet Cruze saw the largest annual gain, while the 7th-place Ford Escape saw the largest year-to-year drop. The model is down 4.6 percent with an average cash price of $17,865.

“2017 was a solid year overall for the used-car business and our Dealertrack Canada network, and we expect this trend to continue in 2018,” Dealertrack Canada vice president and general manager Richard Evans said in a news release.

Additionally, the average 2017 top 10 funded vehicle was 40.7 months old, and the average cash price paid was $19,539 last year.

Canadian Black Book shares its first Used Vehicle Retention Index

MARKHAM, Ontario - 

What has been a staple of its used-vehicle analysis in the United States is now coming to Canada.

As Black Book has compiled in the U.S., Canadian Black Book announced today the release of its first Used Vehicle Retention Index for Canada.

Editors highlighted the index will serve to offer what they called “unbiased and accurate” insights and statistics regarding the health of the used wholesale vehicle market in Canada. This inaugural edition covers the month of November.

“We’ve used this type of index data internally for many years, and are now packaging it up to provide Canada’s auto industry a free monthly resource to help monitor the ongoing vital signs of used vehicle pricing domestically,” said Brad Rome, president of Canadian Black Book.

“This information is impartial to any brand, and can help guide decision makers with accurate figures regarding the strength or weakness of used-vehicle prices,” Rome continued.

Just like in the U.S., the Canadian Black Book Used Vehicle Retention Index is calculated using Canadian Black Book’s published wholesale average value on 2- to 6-year-old used vehicles, as a percent of original typically-equipped MSRP. Canadian Black Book’s wholesale average is a benchmark value for used vehicles selling in the wholesale auctions with the vehicle quality in average condition. The index is weighted based on used vehicle sales volume and adjusted for seasonality, vehicle age, mileage, condition, and inflation (MSRP).

Aggregated from daily vehicle value updates, and captured throughout thousands of wholesale vehicle transactions across the country, the Canadian Black Book Used Vehicle Retention Index is designed to represent data across all regions of Canada.

“The index is based on a comprehensive list of vehicles included in the Canadian Black Book wholesale database, and includes no bias toward any brand, data source or region, ensuring an accurate report of the used-vehicle market,” the company said

The index will provide automotive industry professionals and watchers with insight regarding trends with comparisons year-over-year and month-over-month. From a more macroeconomic perspective, it will illustrate pricing performance since the index commenced with data from 2005.

“We are always being asked about the overall state of used vehicle value retention, which we are happy to answer.  This new regularly published index will just make it easier and provide a more visual means to get those answers and see the direction of prices in Canada,” said Brian Murphy, vice president of research and editorial at Canadian Black Book.

This first index illustrates the effects of the “economic pain” of 2008-2009 in the index.  This “pain” becomes even more visible after examining full-size trucks during that time as prices fell more than 15 percent nationally. 

Late 2009 saw what editors dubbed as a false recovery of prices, followed by falling prices again. However since the middle of 2010, Canadian Black Book noted there has been a remarkable and steady growth in prices overall. 

Today the index — which can be downloaded here — is currently at its highest level (102.4) since it was first calculated using 2005 data.

Editors determined the strongest segments are full-size luxury crossovers/SUVs, midsize crossovers and small pickup trucks.  The segments with weakest performance are the near-luxury cars and subcompact cars, both perform considerably below the market average.  Both however have strengthened in recent months. 

A more detailed index at the more granular segment level will be made available for Canadian Black Book clients upon request.

The index will be posted monthly on CanadianBlackBook.com.

The latest U.S. index update can be found here.

RVI spots used-car price declines in Canada

STAMFORD, Conn.  - 

While the exchange rate climbed, Canada’s used-car prices moved downward in the first full month of summer.

That’s according to RVI Group, whose Market Update for August indicated that the RVI Used Vehicle Price Index (Real) dipped 0.1 percent month-over-month in July and declined 0.3-percent year-over-year.

Nominally, there was a 1.1-percent decline in used-car prices from June but a 1.9-percent uptick from July 2016, RVI said.

The U.S.-to-Canadian exchange rate was 0.79 in July, compared to 0.75 in June and 0.77 a year ago, RVI said.

Segment trends

Delving into the individual segments within the index, RVI found that nine showed year-over-year price gains, with nine showing decreases. The largest overall decrease was for luxury coupes (down 15.8 percent from July 2016), with small SUVs (down 7.6 percent) with the largest decline when just looking at high-volume segments.

Leading the increases was the luxury full-size sedan (up 15.1 percent).

But among high-volume segments, compacts showed the most price growth (up 5.9 percent), according to RVI.

 

Murphy: With interest rate rise, used-car prices to fall

MARKHAM, Ontario  - 

Wind down the economic waterfall, and the impact of a higher Canadian interest rate to the used-car market is clear.

Canadian used-car prices will be heading downward, but the vehicles themselves will no longer be making that move.

An increased interest rate means a stronger Canadian dollar, and with less disparity between the U.S. and Canadian dollars, the proposition of exporting hundreds of thousands of cars to Canada’s southern neighbor becomes less appealing for the U.S. — resulting in lower used-car prices up north.

That’s the take of Canadian Black Book analyst Brian Murphy, who outlined these thoughts in a perspective the company provided to media.

Murphy, who is CBB’s vice president of research and editorial, was explaining the potential auto industry effects from the 0.25-percent interest rate bump that Bank of Canada Gov. Stephen Poloz revealed two weeks ago.

While touching on potentially higher new-car prices for consumers down the road, Murphy argues the more significant impact is the increased value of the Canadian dollar — which has already climbed $0.06 in the past two months, he said — and how that might impact used-car prices.

For starters, it drives down new-car sales, eventually slowing used-car prices, Murphy explains.

“As the strength of our dollar had been declining since 2013, U.S. interest in Canadian used vehicles increased,” Murphy said in the analysis. “Depending on who you ask, upwards of 200,000 vehicles have been being exported to the U.S. annually.

“U.S. buyers and/or Canadian exporters have been taking full advantage of a lower Canadian dollar and been moving vehicles across the border to sell at a higher price in the States versus here at home. This export demand has inflated our used-car prices domestically,” he said.

Fewer pull-aheads

Stronger used-car prices are motivation for dealers to get consumers out of their current lease or loan early, then sell that pre-owned unit at this elevated price and sell the customer a new car, he explained.

Also potentially at play, Murphy said, is that the very nature of high used-car prices mean more consumers have equity in their car, which gives the lease/loan “pull forward” activity more credence.

But don’t expect this to last, he said.

“At some point soon, the rising Canadian dollar and falling U.S. used vehicle prices will make it unattractive for U.S. buyers to purchase Canadian inventory in such large volumes,” Murphy said. “The impact to the Canadian auto industry will be a slowdown of ‘pull forward’ activity, as it won’t make economic sense to pull as many consumers out of their vehicles early because they won’t command such high prices on the used market.”

Lower prices all-around

The approximate “tipping point” where Canadian exports to the U.S. would decline dramatically is a $0.85 dollar, according to Canadian Black Book.

The gain in off-lease volume in the U.S. this year is around 500,000 units, Murphy said, also pointing out that Black Book’s U.S. used-car price index is down 10 percent year-over-year.

 “The U.S. vehicle market is bracing for a large downward adjustment in used prices,” Murphy said. “Add in a stronger Canadian dollar, driving up acquisition costs, and there will be less demand in the U.S. for Canadian used vehicles.”

And eventually lower prices.

“On the positive side, Canadian used-vehicle shoppers and used vehicle dealers will be rewarded with better deals in the market compared to what they have seen over the last few years,” he said.

 

2 factors to push used prices 9% lower by 2020

STAMFORD, Conn. - 

RVI Group’s Risk Outlook for June found that real used-vehicle prices in Canada decreased in May on a year-over-year basis. Analysts place the exact downward movement at just 0.4 percent.

When compared to April, the May softening was a bit more notable, as RVI Group pinpointed the dip at 1.5 percent.

Among higher volume segments, analysts found that full-size pickup prices increased the most on a year-over-year basis in May, ticking up by 6.9 percent. Meanwhile, sub-compact car prices decreased 5.9 percent on a year-over-year basis.

In May, the report noted the exchange rate was $0.73 USD/CAD, down from $0.74 USD/CAD in April. RVI Group also mentioned Canadian GDP grew in the first quarter to an annual rate of 3.7 percent from 2.6 percent in the fourth quarter.

However, the report recapped that new-vehicle sales declined, with a 1.87 million unit SAAR being recorded in the month of April.

“We expect that a stronger Canadian dollar, along with the growing supply of off-lease vehicles, will continue to put downward pressure on used-car prices, which are expected to decline by 9.0 percent from current levels by 2020,” RVI Group said in the report.

Mobials introduces valuation tool powered by Canadian Black Book

CARY, N.C. - 

Mobials recently debuted Tradesii, its trade-in valuation tool for dealer websites that is powered by Canadian Black Book.

Tradesii was first launched in April as the exclusive on-site trade-in valuation tool for more than 3,000 dealers on Kijiji.ca.

More than 200 Canadian dealers have already signed on to the service, roughly over 3 percent of the Canadian dealer market, according to Mobials.

Mobials president Marty Meadows said that Tradesii is a truly Canadian experience.

“It is built by Canadians, for Canadian car dealers,” Meadows told Auto Remarketing Canada in a phone interview.

“This is probably the most important piece of it all, we use the No. 1 trusted brand for values, for Canadian consumers — Canadian Black Book. If you're searching Google, ‘What’s the value of my trade?’ what will come up in search is Canadian Black Book. So we partnered with the best brand with the best values, to hope the best consumer experience.”

Consumers visiting dealer websites fitted with Tradesii are offered the opportunity view their trade-in value in exchange for providing their contact information.

“It's valued for value,” Meadows added.

The Tradesii report also provides the average asking price of similar vehicles that are listed on CanadianBlackBook.com, allowing car shoppers to see what their current vehicle would list for at retail.

The lead and the specifics on vehicles searched for on Tradesii during car shoppers’ website visit is passed on to the dealer.

What dealers get from Tradesii is highly convertible leads that convert to sales, according to Meadows.

Meadows said his top dealer pulled 56 leads, and their ROI was 56-to-one.

“We are very happy with ROI thus far related to Tradesii. In comparison to our legacy trade-in calculator, I believe our web leads have increased tenfold and I know our Kijiji leads are up over three times,” Larry Hudson Chevrolet Buick GMC dealer principal Sean Hudson said in a Mobials news release.

“We have three dealer sites all using the tool and our issue now is fully capitalizing on the spike in leads, which is a good problem to have.”

For additional information about Tradesii and its specific offerings visit, tradesii.com.

Shoppers demand trust & transparency during car-buying process

CAMBRIDGE, Mass. - 

CarGurus recently released a survey that found trust to be a leading factor for consumers when shopping for expensive purchases, such as cars. 

“Survey respondents indicated that the car shopping process is very much in need of increased transparency if dealers are to win the trust of Canadian car shoppers,” the car research and shopping site said in a news release announcing the survey.

When asked which major purchases, such as a car, home, mortgage or event tickets yielded the most transparent information on price, CarGurus said: “only obtaining a mortgage (7 percent) fared worse than car buying (9 percent).”

More than a third of Canadians' trust in a seller fades away if the store price is greater than what they read advertised online, according to the survey.

23 percent of respondents said a detailed cost breakdown would increase their trust in a seller and 31 percent said they determine trustworthiness by word of mouth.

Consumers use both price information and customer reviews to make their opinions and decisions, the survey found. 

Nearly half of Canadians rely on customer reviews to determine if a website is trustworthy, according to CarGurus.

Additionally, 40 percent of survey respondents said when researching expensive items online the appearance of both positive and negative customer reviews make the process more transparent and trustworthy.

"Establishing trust goes a long way with consumers, particularly those making big purchases," CarGurus senior vice president of consumer marketing Sarah Welch said. "In our experience at CarGurus, we've seen just how much transparency – providing reliable, easily accessible customer reviews, engaging with negative reviews and keeping updated price information across online inventory platforms – enhances the consumer shopping experience, and in turns benefits dealers."

How wholesale prices trended in April

CARY, N.C. - 

How did used-car prices trend last month?

A pair of indices released this week sheds some light.

According to a report accompanying the ADESA Canada Used Vehicle Price Index — powered by ALG — there was a 0.12-percent month-over-month gain in wholesale prices.

Of the six segments included in the report, however, just two showed price growth for the month.

Mid-compacts were up 2.1 percent from March and full-size pickups were up 0.5 percent. The midsize segment was down 2.9 percent, minivans were off 8.6 percent, compact SUVs fell 1 percent and midsize SUVs dipped 0.2 percent.

Over at Cox Automotive, there was a 5.3-point dip in the Manheim Canada index. However, the index remained up by 1.8 points year-over-year.

Manheim Canada said the sports cars had the strongest monthly decline at 68.3 points. Most segments were down on a monthly basis,  the company said, with the lone exception being pickups, which climbed 6.4 points.

Compact pickups had the greatest gain within that class, climbing 23.3 points.

OMVIC launches all-in price advertising consumer awareness campaign

TORONTO - 

The Ontario Motor Vehicle Industry Council announced it recently launched a province-wide multi-media campaign to increase awareness of all-in price advertising.

OMVIC said it started the campaign following research the council conducted that showed some Ontario car dealers continue to add additional fees to their advertised prices — though it is illegal and disadvantages law abiding dealerships.

“Since 2010 car-buyers have had right to all-in price advertising”, OMVIC director of communications and education Terry O’Keefe said in a news release. “That means dealers must include all fees, except HST and licensing, in any advertised vehicle price.”

The council said when dealers don’t include all fees it is unfair to car-buyers and non-compliant dealers get an unfair edge over dealers who advertise prices which include all fees and charges.

“If consumers know they have a right to all-in price advertising, they are able to protect themselves should they encounter non-compliant advertising,” OMVIC said.

The Ontario-wide campaign has used television, radio, online, billboard/transit and social media advertising to inform car buyers about advertising pricing.

OMVIC’s awareness initiative includes a TV commercial directed at consumers that says, “Buying a car? The fun is back! Ontario made all-in price advertising the law for Ontario car dealers — no more hidden fees. All-in price advertising: it’s your right!”

The campaign’s 15-second TV commercial along with a 36-second radio message is currently available on Youtube.

Below are examples of fees or charges that dealers must include in an advertised price, according to OMVIC.

  • Freight
  • PDI-PDE (pre-delivery inspection/expense)
  • Administration (Admin) fee(s)
  • Government levies (air tax, etc.)
  • Safety and e-test (unless the ad contains a mandated "Unfit Vehicle" or "As-Is Vehicle" statement)

For more information on all-in price advertising, visit OMVIC’s website.

Canadian used prices steady, but slight softening likely

TORONTO - 

It won’t be a drastic change by any stretch, but Canada appears headed toward a modest softening in used-vehicle pricing.

And like the U.S., that dip is expected to be more pronounced for cars than for trucks. 

As it stands, the market has been fairly solid and steady.

In a presentation here last week at the Auto Remarketing Canada Conference, KAR Auction Services chief economist Tom Kontos shared a fairly positive outlook on Canada’s overall economy and auto industry, including the used-car side.

The country’s new-car sales appear headed for a 1.9-million- to 2-million-unit year, which Kontos found to be a great sign.  

March was the best month ever for new-vehicle sales “by a significant margin,” according to the ADESA Canada Used Price Index report powered by ALG.

As for the wholesale market, straight-average data from ADESA’s auctions indicate steady growth in used prices, Kontos said. The growth is plateauing, perhaps sliding a bit from peak levels, he said.

The softness that has found its way into U.S. wholesale prices has not yet been seen here, Kontos said.

“In Canada, there’s a ways to go before we reach that stage,” he said. “In the U.S., that stage has been reached. In Canada, it will take more off-lease volume and supply growth from other sources — perhaps fleet growth that we’ve seen in recent years, (with) more of those fleet vehicles coming back.”

As that volume returns, Canada should see some downward pressure on used prices, Kontos said. “In the meantime, prices overall have been solid, and especially for SUVs and pickup trucks.”

One of the drivers to that strength, particularly for SUVS and pickups, has been U.S. buyers going north and snatching up vehicles from an already scarce supply of these trucks.

But the Canadian market shouldn’t count on that continuing for much longer, Kontos said.

The ADESA Canada price index — which adjusts for things like vehicle mix and seasonality, as opposed to a straight-average on price — has been on the rise for several years in a row, Kontos said, noting that it is likely the longest growth streak ever for the index.

Though there has been steady growth, there has been plateauing recently. The latest reading of the index — which came out Thursday, after Kontos’ presentation —was flat, with wholesale values “stagnant,” according to the report accompanying the index.

“What may be contributing to that plateauing is that U.S. buyers, which have really been a contributor to that growth over time, are starting to stay home because there’s more volume available to them at home and the prices are starting to soften and become more affordable,” Kontos said.

“It’s been a great seller’s market for a long period of time. That period of time may be coming to a gradual end. I’m not saying prices will fall off a cliff,” he said. “In my crystal  ball, I’m not predicting a downward turn in prices that’s very dramatic, but a general softening in prices is what you should expect … largely due to supply and also due to, on the demand side, a ‘staying home’ of U.S. buyers.”

Part of that volume may be in the form of vehicles coming off lease. Kontos sees off-lease growth in U.S. as a “precursor” to what could happen in Canada. But like the U.S., he finds the certified pre-owned market as a good outlet for that volume.  

“We’re going to see a resurgence in off-lease volume — maybe not at a level that’s alarmingly high, but at a level that will put downward pressure on used-vehicle values,” Kontos said. “But if you have, on the demand side, an opportunity for consumers to really embrace the certified pre-owned alternative to both a new and a used-vehicle, I think it creates a good environment for sustaining used-vehicle values despite growth in supply.”

Another influencer on used-vehicle prices is the incentives on the new-car side. In general, Kontos finds some of the incentive activity somewhat concerning, but more so for the U.S. than for Canada.

“If the economy stays strong, if new-vehicle demand stays strong and if manufacturers remain disciplined in their use of incentives, then I don’t think it will be a huge threat here in Canada,” he said. “I think it’s becoming more so a threat in the U.S.; maybe less so here in Canada.

“But keep an eye out on that,” Kontos told the crowd here, “and to the extent that you’ve got any say in the matter, try to maintain that discipline going forward.”