ORLANDO, Fla. -

The number of units flowing into the auction lanes this year is expected to jump to about 7.9 million units, according to the 2013 Used Car Market Report from Manheim.

This would be a 5-percent increase from 2012, the report indicated. And while still down significantly from the 10 million-unit-mark reached in 2003, this growth is founded upon “solid business practices,” Manheim suggested, in contrast to some of the factors that pushed auction volumes higher 10 years ago.

Meanwhile, in its Auction Industry Report following the fourth quarter of 2012, the National Auto Auction Association predicted that the increase in overall auction volume “will accelerate” this year in light of fleet/lease volume climbing after this segment decreased in 2012, as well continued improvements for dealer consignment and OEM/factory consignment.

The report — which was prepared by NAAA economist Ira Silver — found that full-year auction volume for the industry was up 0.5 percent year-over-year in 2012.

 “This year we expect to see continued auction volume gains in dealer consignment and manufacturing/factory; and a turnaround in fleet/lease, giving the industry an up year with a significant total volume increase,” the report notes.

To get the standpoint of the seller at auction, Auto Remarketing talked with a couple consignors who were in Orlando, Fla., for the NADA Convention & Expo in February.

At GM Financial, vice president of asset remarketing Dan Heinrich is looking for a slow-and-steady climb in volumes.

“In 2008, as capital markets started tightening up, we pulled back from an originations standpoint, like most other lenders. That took some time before it really came into our world, in the remarketing industry,” Heinrich said. “So, we’ve gotten down to some of our lower volume numbers, compared to where we’ve ever seen before. We’ve hit the bottom, and we’re starting to go back up as our originations increased a couple years ago.

“So, we’re starting to see some of that volume return, but it’s going to be a small, steady increase, especially in our retail portfolio,” Heinrich said. “But I think with that we’re going to see that volume start growing at other lenders, as well.”

Auto Remarketing sat down with Brent Sergot, who is the president of DataScan Holdings LLC and its subsidiaries, DataScan Technologies and DataScan Field Services. He is also the vice president and general manager of CenterOne Financial Services.

Sergot believes that in terms of wholesale volume, 2012 marked a “trough.”

“Wholesale volumes are largely driven by off-lease vehicles,” he said. “In 2012, you were dealing with cars that retailed in ’08 and ’09. And everyone knows what happened in ’08 and ’09. Everyone headed for the hills.”

But with the improvements of 2010 and 2011, “I think it’s only up from here,” he said.

In fact, during his conversation with Auto Remarketing at NADA, Sergot gave an example of something he saw at the Vehicle Finance Conference & Exposition earlier that week.

He said there was an audience polling system that asked where lease penetration in the new-vehicle market would reach; and the majority, he said, indicated a range of 26 percent to 29 percent.

“That bodes well for wholesale volumes,” Sergot said. “A certain segment of those customers will buy their cars and never be seen from again, but a large segment of those customers are going turn the keys back to the lessors and go buy another new one.

“And that generates wholesale volumes for auctions.”

Overall Used-Car Volume

Beyond the auctions and looking at the broader picture of overall used volume in the marketplace, NADA Used Car Guide is projecting that the number of units aged one to eight years old will fall 3 percent to 16.5 million units this year, even though late-model volumes (vehicles from ages one to three) are projected to climb 8 percent.

“In addition, late-model volume will still be approximately 25-percent below where it was in the three years leading up to 2009 even after this year’s increase is factored in,” NADA Used Car Guide’s Jonathan Banks wrote in the February Guidelines report. “So while the growth in late-model supply will apply some downward pressure to younger used-vehicle prices, the continued slide in early-model supply will benefit prices of older models.”

Specifically, NADA is projecting 6.9 million late-model units in the used-car market, up from 6.4 million in 2012. This uptick is due mainly to a 14-percent gain in off-lease volume, Banks noted.

Used supply for vehicles up to eight years of age will come in at 16.5 million, down from 17.1 million in 2012.

Beggs on Used Supply

Offering another vantage point, Black Book’s Ricky Beggs talked with Auto Remarketing at the NADA Convention and Expo about used supply, and pointed to the 14.5 million new cars that were sold in 2012, an increase of 1.8 million from the year before.

“60 percent of those had a trade-in,” Beggs said. “That alone is going to be the biggest driving piece of it.”
Earlier in the interview, Beggs mentioned that with used volumes going up, this will have an impact on pricing in the auction lanes, as well.

Consider the Feb. 1 through May 1 periods of 2011 and 2012. In the 2012 time frame, 12 of the 24 segments of wholesale vehicles that Black Book tracks climbed in price. In the 2011 period, 14 increased.

(Beggs explained that the 2012 data includes the 2007–2011 model years, while 2011 data includes the 2006–2010 model years).

“My feeling is, we’ll have a good market, but it won’t be 12 segments that will increase (in price),” said Beggs.

He tossed out the possibility of there being between eight to 10 segments climbing in price during this time frame, “which is still pretty positive, but not at the level we were in the past.”

Beggs added: “The driver behind all of that is each year we produced more used cars in the market … and so the supply is getting a little better, you don’t have to fight as hard to get your inventory; it’s just not as competitive there. It’s still pretty competitive, because we’re not at the level that’s really going to change the marketplace, per se.

“Now, wait ‘til 2014.”