Used-Car Market Intelligence Report: Part II

In this installment of the Used-Car Market Intelligence Report series, Auto Remarketing tackles one of the more pressing industry concerns in recent years: used-vehicle supply (or often lack, thereof).

While signs appear to be pointed in the right direction for dealers, finding enough used vehicles to fill their lots still can be a challenge.

To help demonstrate the supply situation faced by dealers in the first half of 2012, we talked to some of the industry’s top economists and analysts and broke down the analysis by wholesale and retail channels.

First up was the wholesale market.

Wholesale Value Set to Bounce Back Stronger

Dealers still might wonder, “Where are the cars?”

In response, economists from both Manheim and ADESA pointed toward 2013 as the point when wholesale volume rebounds even stronger than the lift dealers were seeing in the first half of this year.

Manheim’s Tom Webb and ADESA’s Tom Kontos each mentioned the uptick in off-rental volume combined with dealer-consignment growth as the catalysts for more units passing down the lanes during the first six months of 2012.

In speaking with Auto Remarketing in June, both wholesale experts touched on how both they and used-car managers are setting their sights on next year’s projected volume pick-up as a tell-tale sign the market is further recovering from the lagging doldrums of 2010.

“The industry is definitely looking forward to 2013,” Webb indicated. “The only problem there might be is the economic recovery is a little bit shaky. If something were to be announced, something bad, it would hit dealer consignment, but the commercial volumes certainly should show some growth in 2013.”

Meanwhile, Kontos is eyeing wholesale growth in two specific segments.

“The expectation is more off-lease volume will return in 2013,” Kontos said. “In addition, I wouldn’t be surprised if we see some more repo volume, as well, just based on the aggressiveness of automotive lending that’s taking place right now. Delinquency rates are still at manageable levels. Just the sheer amount of credit availability would lead one to expect more repo volume next year.”

“Clearly, the off-lease volume is the one we’ve been talking about for quite some time coming in 2013,” he added.

Discussion About First Half of 2012

While the upbeat scenario points to a strong wholesale volume rebound in 2013, both Webb and Kontos alluded to how the market wasn’t too rough on dealers through the first six months of this year.

“Generally speaking, I would say we were pleased with volumes,” Webb said. “Volumes are fairly predictable, but there were some pleasant surprises, primarily on the off-rental side. That’s where the volumes were up quite substantially. Of course, dealer consignment volume continues to grow because the retail market continues to grow.

“However, off-lease volumes are continuing to decline. And certainly the way loans are performing, repo volumes are also down,” Webb added. “I think the third quarter might show a little bit more weakness in off-rental because they were up so strong in the first half of the year. They were basically front-loaded.”