LAS VEGAS and DETROIT -

Economic conditions, compliance and how the auction industry embraces digital selling, are wholesale trends on the watch lists of some economists, analysts and auction professionals, many of whom attended Used Car Week, Nov. 11-14, in Las Vegas.

In separate interviews, Tom Kontos, chief economist at KAR Global, and Charlie Chesbrough, senior economist at Cox Automotive, said they will be on the lookout for potential economic reaction to the interest rate inverted yield curve that occurred last summer.

A yield curve inversion is when near-term interest rates are higher than longer-term interest rates. It creates an environment in which banks don’t like to lend, so they tend to pull back, and there is less credit available, Chesbrough said.

Historically, yield curve inversions have been followed by economic recessions within six months to a year, Chesbrough added.

“We know that the 10-year and 3-month yield curve inverted back in May and was inverted all through the summer, and it’s only just recently gotten back to zero,” said Chesbrough who did not attend Used Car Week, but commented during a phone interview just prior to conference.

“That would suggest that sometime in the spring we might see a bit of a pull back,  because the economy would be much slower. That’s one of the things we have to watch, but in terms of where we are today, we don’t see that yet.”

Kontos said he doesn’t believe the economy is headed into a recession this year, but because it is an election year, the economy bears watching.

“We had an inversion of the yield curve (in 2019),and that’s usually a warning sign that a recession may be 20 months away,” Kontos said. “It still pays to be cautious with regard to the general economy.”

New vs. used

New-vehicle sales are expected to slow this year, but there will be an ample supply of used vehicles to fill the void.

Around 4 million off-lease vehicles are expected to re-enter the market this year, according to Chesbrough.

Those vehicles — late-model and equipped with more technology such as navigation systems, back-up cameras and blue-tooth connectivity than in previous years — are attractive alternatives for people who can’t or don’t want to buy a new vehicle, analysts agree.

In 2020, used-vehicle “demand and supply will be more aligned” with consumer preference, said Anil Goyal, Black Book executive vice president of operations, during a sidelines interview at the conference.

“The supply of used sedans is declining, and more and more people want SUVs and SUVs are going up, so that supply is in line with demand,” he said.

“You can get a 30% to 40% discount when you buy a used (vehicle), compared to a new (vehicle). That market is going to stay strong,  but the volume of new vehicles sold is going to decline (in 2020).

“I think the market has held up in terms of used (vehicle) prices by SUVs and trucks,  and those segments are going to be stressed a little bit” this year.

Keeping tabs on compliance

Cory Wisdom, fleet/lease manager at Texas Lone Star Auto Auction Lubbock, in Lubbock, Texas, which is part of the XLerate Group, said he will be keeping tabs on a range of issues this year.

For example, take compliance.

Because a lot of his auction’s consignors are institutional finance companies that are selling vehicles once owned by consumers, employees often find personal and sensitive information and property left behind in the vehicles by consumers and consignors.

So four years ago, the company devised policies that call for designated employees to search  vehicles as soon as they arrive at the auction.

“We remove and shred all personal information, from IDs to birth certificates and anything that would have a customer’s name, address or more information,” he said during a sidelines interview.

“You have to protect that from a physical standpoint and a digital standpoint.”

All auctions, all digital?

Another trend to watch is how the wholesale industry, which has been selling vehicles to dealers online for at least two decades, is still growing and refining that process.

At the forefront of that effort are Cox Automotive’s Manheim and KAR Global, ADESA’s parent company.

Derek Hansen, Manheim vice president, offsite solutions, said 48% of all transactions at Manheim are to digital buyers, up from 28% four years ago, “and we expect that trend to continue.”

In 2020, the wholesale and retail processes will become more linked, Hansen predicted, and Manheim has an arsenal of tools to make that happen.

For example, Manheim Express, it’s digital wholesale buying and selling app for dealers, is integrated with appraisal information from its sister company, vAuto, that puts vehicle price information at their fingertips anytime.

Accessing that information while interacting with consumers gives dealers the opportunity to improve their profitability with vehicles when they go through the disposition process, Hansen said.

“That’s where the market will continue to evolve in 2020, and we’re continuing to invest in our digital tools to enable it,” Hansen said during an interview at the conference.

Peter Kelly, president of KAR Global, during his conference presentation: “The Future is Today: What’s Next for Automotive Remarketing,” said he believes that in the future, all KAR auction transactions are going to happen on digital platforms.

“We’re already a long way down that path,” he said. “At KAR, 58% of the vehicles (in 2019) we’ll sell to online buyers. So, we’re headed toward 100%. The only questions is when and I’m not going to predict when. But every year it goes up.”