Sales Forecasts

NADA: 2 factors will keep new-car sales strong

McLEAN, Va. - 

National Automobile Dealers Association chief economist Steven Szakaly pinpointed what he believes are the two key factors that will sustain the new-vehicle sales momentum in 2016.

During a recent NADA-TV interview, Szakaly explained the elements that should help new metal roll over the curb are low gasoline prices and rising incentives.

“This year, we’ll start to see sales struggle a bit, and we’ll see incentives come up. OEMs have a lot of capacity," Szakaly said.

“This is a great industry right now. You look at the shows: Los Angeles, Detroit, New York coming up and the NADA convention as well, and they’re all looking at banner years,” he continued.

Szakaly added that the auto industry has achieved an unprecedented recovery since the economic recession.

“Wages are up, and automobile dealerships are averaging growth of over 3 percent, well above the national average,” he said.

To watch the complete interview with Szakaly, click on the video at the top of this page.

New-car prices expected to ‘stall’ in 2016

LOS ANGELES - 

Requisite Press reported Wednesday that it expects new-car prices to “stall” this year, perhaps offering price-conscious shoppers another reason to buy a new car.

This news comes off a record year for new cars sold in the U.S., with 2015 sales coming in at 17.5 million.

Requisite Press’ assertion stems from its December 2015 Auto Buyer's Affordability Index (ABAI) of 57.9 percent.

What does this number mean? Think of it this way — the index indicates that a median-income household can afford 57.98 percent of the average new-car price.

Though the ABIA reading fell from 59.0 percent on a monthly basis, the December reading is up nearly 13 percent year-over-year.

On an annual basis, the ABAI rose 6.6 points in 2015, from 51.3 percent to 57.9 percent.

The jump, according to Requisite Press, was helped in part by an increase in the median household income of more than $2,800 last year, made even more impactful because the average vehicle transaction price remained below peak 2014 levels throughout last year.  

The company’s advice for customers? Shop around and approach dealers.

"New-car prices were essentially flat in 2015, and more of the same is expected this year," said Phil Kelton, president of Requisite Press. "Consumers will benefit from improving affordability, and can gain additional savings with this simple strategy — avoid third-party buying services, broadcast the sales opportunity to multiple dealers, and buy from the best."

The company said it expects downward pressure on new-car prices to increase this year.

“Market forces that kept a lid on prices last year — waning U.S. sales growth, increasing supply of nearly new vehicles, and rising interest rates—are expected to intensify this year. As a result, manufacturers will face increased pressure to compete on price,” the team at Requisite Press reported.

 

Kontos: Used supply growth underlies wholesale price softness

CARMEL, Ind. - 

The battle between supply and demand is nothing new to dealers — and as we head further into the forecasted growth in used-vehicle supply, wholesale price softening is to be expected.

The latter is the message from ADESA Analytical Services’ executive vice president and chief economist Tom Kontos in the December edition of Kontos Kommentary, where he summed up the year quite succinctly and set the scene for 2016.

“2015 was largely a year when strong retail used vehicle and CPO demand, benign new-vehicle incentive activity, and the embrace of upstream as well as traditional auction processes among remarketers diluted the usual negative impact of growing supply on wholesale values,” Kontos said in the report.

“Further masking that impact was the displacement of off-rental program vehicle volume that appeared in the first half of the year rather than the last quarter of 2014,” he added. These high-dollar, late-model units biased average wholesale prices upward for much of the year.”

Unfortunately, that dilution of wholesale values started to clear up by the end of the year, most notably in December, where Kontos says prices fell by upwards of 1 percent on both a month-over-month and year-over-year basis for various segments.

Let’s break it down. Wholesale used-vehicle prices in December averaged in at $9,763, a decrease of 1.2 percent month-over-month and down 1.0 percent relative to December 2014.

The only vehicle segment that showed any significant monthly increase was the minivan segment, while truck values, in general, declined less than cars and crossovers.

Looking at the various types of sellers, wholesale prices for vehicles remarketed by manufacturers were up 1.6 percent month-over-month but down 3.5 percent year-over-year. For fleet/lease consignors, both metrics were down 0.1 percent and 0.7 percent, respectively.

Within the fleet/lease consignment category, off-rental risk units showed small month-over-month and year-over-year price increases.

Three-year-old vehicles, however, did not, Kontos said. These vehicles — which he said are a proxy for off-lease vehicles — showed significant declines in both pricing metrics.

Dealer consignment saw a 2-percent decrease in December, compared to November, and a 1.2-percent decreased compared to December 2014.

To check out Kontos’ full breakdown of wholesale used-vehicle prices by vehicle model class, click here.

What to expect as used unit sales rise & margins slide

ATLANTA - 

At the close of the third quarter, our nation’s seven publicly traded dealer groups collectively averaged their 25th consecutive quarter of same-store used unit sales increases.

Cox Automotive’s chief economist Tom Webb, speaking during the Manheim Index Quarterly Conference Call on Friday, says a 26th is probable, but will be a challenge to achieve.

Slide 14 shows the seven publicly trade dealership groups and it shows that they have had 25 consecutive quarters of same-store growth in used-units retailed,” Webb said, referring to slides accompanying his presentation. “Achieving the 26th quarter will be a little bit difficult because CarMax has already reported a 0.8-percent decline in their quarter, which ends in November.

But I still think the 26th quarter will be achieved because CarMax was more focused on supporting gross than I believe that the others will be. Which, obviously, writes in the equation, that by extension, I expect the downward sloping lines in Slide 15 will also continue.”

And the latter slide, as you probably inferred, references the used-vehicle retail gross margin for the same publicly traded dealer groups. The gross margins for used sales for the public groups is currently trending to its lowest percentage in several years — a trend Webb says has two faces.

“Now, there are two ways of looking at that gross margin trend. One could just say it’s plain ugly, and it’s dangerous,” he said. “Or, you can argue that it’s just simply the case of a competitive industry passing on its efficiency savings to the consumer. Obviously the truth lies somewhere between the two.

But more importantly, from my perspective, I do not believe that grosses should, and hopefully they won’t, go much lower. So that means don’t look for operating efficiencies at the retail level to continue to bail out the commercial consignors. The dealers have done more than their part,” Webb said.

He says dealership proficiencies have helped that margin decline due to the lowered costs of operation that result from such efficiencies.

“A lot of that reduction in gross, I wouldn’t say was ‘willingly’ given away, but because there were tremendous increases in operation efficiencies, other dealers were able to give it away,” Webb said. “The ability to keep achieving those operating efficiencies I think are a little bit limited going forward. And certainly the benefit of exceptional growth in the throughput has probably slowed it a little bit, too.”

For more takes on Webb’s analysis, including the used-car market’s current stretch of wholesale price stability, click here.

Subaru & Ford top brand-loyalty rankings

SCHAUMBURG, Ill. - 

Subaru and Ford are on top of two loyalty rankings released by Experian Automotive on Tuesday, while the ranking of individual model loyalty was dominated by luxury vehicles.

According to Experian’s analysis of roughly 6.8 million household repurchases that put pen to paper between October 2014 and September 2015, Subaru and Ford ranked highest, first and second, respectively, in both brand loyalty and manufacturer loyalty.

Looking at individual models, Land Rover’s Range Rover was the model with the most repeat buyers (48.2 percent).

As an overall manufacturer, Toyota ranked third-highest in customer loyalty — but on a brand level, Mercedes-Benz was the third-highest overall in brand loyalty while also ranking first in the luxury brand rankings.

“It’s exciting to see that manufacturers’ efforts to improve owner loyalty are working,” said Brad Smith, director of automotive statistics and consulting at Experian. “Over the last few years, loyalty rates have increased, and these improvements are key to the industry. Understanding rates of consumer loyalty among vehicle brands, makes and models helps to drive better business decisions, such as a dealer selecting inventory and targeting advertising or a manufacturer making adjustments to a vehicle’s design and creating more competitive promotional strategies.”

Here are the top 10 loyalty rankings for each metric, provided by Experian:

Manufacturer Loyalty Top 10
Manufacturer Loyalty Rate (%)
Subaru 67.7
Ford 67.5
Toyota 67.3
General Motors 67.2
Fiat Chrysler 65.5
Daimler 64.9
Kia 63.2
Honda 61.3
Hyundai 61.3
Nissan 61.2
Overall Brand Loyalty Top 10
Brand Loyalty Rate (%)
Subaru 67.7
Ford 66.7
Mercedes-Benz 65.1
Toyota 63.5
Kia 63.2
Hyundai 61.3
Nissan 61.1
Chevrolet 60.7
Lexus 60.7
Honda 59.9
Luxury Brand Loyalty Top 10
Brand Loyalty Rate (%)
Mercedes-Benz 65.1
Lexus 60.7
BMW 57.4
Porsche 57.2
Lincoln 57
Audi 54.7
Land Rover 51.6
Cadillac 49.2
Infiniti 45.7
Acura 43.8
Model Loyalty Top 10
Model Loyalty Rate (%)
Land Rover Range Rover 48.2
Mercedes-Benz S Class 46.6
Lincoln MKZ 44.8
Mercedes-Benz 2500 Sprinter Van 44.8
Nissan Leaf 44
Ram 1500 42.9
Lexus RX 350 42.7
Hyundai Genesis 42.5
Kia Soul 42
Subaru Forester 41.1

Some other interesting facts found by Experian’s study include the following:

  • North Dakota is the state with the most brand-loyal customers (67.2 percent), followed by Michigan (66.4 percent) and Iowa (65.8).
  • 69 percent of lease customers stayed loyal to their brands during the timeframe of Experian’s study, followed by 56.9 percent of consumers with loans.
  • Customers who finances with manufacturer captive finance companies (Ford Credit, Toyota Financial, etc.) were more loyal (63.8 percent purchased same brand again) compared to customers with independent bank loans (58 percent).

CarStory’s top 5 most popular used vehicles

AUSTIN, Texas - 

CarStory released its monthly Used Vehicle Deal Alert on Wednesday, highlighting the best deals it’s seeing for its customers across the country.

On the reverse side, however, is something particularly useful for dealers: the top five most popular used vehicles searched for on CarStory's site.

Here’s the list, based on online searches by make and model, according to CarStory:

CarStory's Top Five Most-Popular Used Vehicles

  • Ford F-150 
  • Jeep Wrangler 
  • Ford Mustang 
  • Cadillac Escalade 
  • Audi A4

The report from CarStory outlines the best used-vehicle deals it can find around the country that are listed on its site, saying that the average savings across the country comes in at $3,039, or 17 percent per vehicle. The top three were on the Toyota Prius (in Los Angeles), the BMW 5 Series (in Phoenix) and the Mercedes-Benz C-class (also in Los Angeles).

“With so much information out there, finding the best deals on used cars can be challenging for consumers,” said Chad Bockius, the company’s chief marketing officer. “Our CarStory Deal Alerts analyze millions of pieces of pricing data to help consumers cut through the digital noise and save dollars this holiday season, while also giving them a snapshot of what other consumers are searching for.”

After L.A., Philadelphia has the second-highest average discount on used vehicles listed on CarStory.

Brand-by-brand, Mercedes-Benz vehicles are discounted in the most cities (13) according to CarStory, followed by Jeep (11), Nissan (6), Chevrolet (4) and Lexus (4).

For more information on CarStory, visit its site here.

Used depreciation down in November

McLEAN, Va. - 

Citing historical trends, NADA Used Car Guide points out that November saw an easing in used-vehicle depreciation, staying the course for the typical seasonal pattern of the industry. November’s depreciation – 1.9 percent – was noticeably lower than October’s 2.7-percent drop.

In the December edition of Guidelines, NADA UCG’s seasonally adjusted used-vehicle price index rose 1 percent compared to last month, to 123.8. Year-to-date, the index falls just 0.2 percent shy of the index’s all-time high averaged last year.

"It's normal for used-vehicle depreciation to slow during the end of the year,” Jonathan Banks, NADA UCG’s executive analyst, said in the analysis. “That said, while the slow is normal for the month, it was steeper than last November's 1-percent slide."

Diving a bit deeper, compact cars saw the biggest hit last month, falling by an industry high 2.7 percent in November, continuing its trend of dropping roughly 3 percent each month for the last seven.

While depreciation for the industry, as a whole, stood at 13.2 percent YTD at the end of November (compared to 12.7 percent for 2014), let’s take a look at all of the segments’ price drops last month, according to NADA UCG:

Change in Wholesale Used-Vehicle Prices – Oct. vs. Nov. 2015

Segment Price Drop Percentage (all values negative)
Compact Car (2.7)
Large Car

(2.3)

Subcompact Car (2.1)
Luxury Mid-Size Car (2.1)
Luxury Compact Car (2.0)
Industry Average (1.9)
Mid-Size Van (1.9)
Luxury Mid-Size Utility (1.7)
Luxury Compact Utility (1.6)
Large Pickup (1.6)
Mid-Size Utility (1.6)
Compact Utility (1.4)
Mid-Size Car (1.4)
Mid-Size Pickup (1.1)
Luxury Large Car (1.1)
Large SUV (0.8)

Year-to-date auction volume, by the end of November, stood at 3.83 million units, up 4 percent compared to the same period last year.

Looking forward, NADA UCG predicts that the prices for used vehicles aged zero to 8 years will fall roughly 1 percent in December compared to November. Zooming in to the segment level, the organization also predicts that subcompact and compact cars will drop by 1 percent, more than any other mainstream segment, while both luxury cars and utilities are expected to lose 1 to 1.5 percent in December.

January prices are expected to remain flat before increasing approximately 0.5 percent in February. 

KBB on resale values: ‘Making great cars is not sufficient'

IRVINE, Calif. - 

When it comes to a vehicle’s retained value from new to used, volume is important — but selling more of a vehicle doesn’t necessarily imply its value will stay. Even if the product is spectacular, perceived quality and new quantity sold do not go hand in hand.

This is one lesson that Subaru and Lexus have apparently learned, as both were today named by Kelley Blue Book for the latter’s 2016 Best Resale Value Award winners for best brand and best luxury brand, respectively.

Auto Remarketing chatted with Eric Ibara, KBB’s director of residual values, to see why.

“I guess the simple answer would be that they make great vehicles that people want. There are a lot of brands that make great cars,” Ibara said. “I think what we’ve learned is that making great cars is not sufficient. You also need to manage the way in which vehicles are marketed and sold. And what these brands do very well, I think, is they match their production with the market demands.

“They don’t overproduce the vehicles, and they’re also marketing the vehicles in a way that enhances the value of the vehicles. So they’re not discounting their vehicles to get more volume.”

KBB's 2016 Best Resale Value: Top 10 Cars
Chevrolet Camaro Subaru Forester
Chevrolet Colorado Subaru WRX
GMC Canyon Toyota 4Runner
GMC Sierra Toyota Tacoma
Jeep Wrangler Toyota Tundra

And if you take a look at the top-10 list of vehicles from the 2016 model year that KBB expects to retain the highest percentage of their sticker values, you probably won’t be surprised that eight out of the 10 are trucks or utility vehicles. What may surprise you, however, is that five of the vehicles expected to depreciate the least are from domestic automakers.

With four of those five being manufactured by General Motors, we asked Ibara if he was surprised.

“I think that people could be surprised by that. You don’t normally think of domestic brands when you think of vehicles that retain their value,” he said. “But I think that ever since GM went through bankruptcy they really have changed the way in which they approach the market. I sense, and I see, that they’re doing a better job of matching production to demand. They’re not overproducing vehicles and they’ve cut back on the volume of vehicles that they send into daily rental.

“I think these are all good signs but I guess, first and foremost, they’re making vehicles that are very appealing when you see the vehicles that have come to market over the last few years, like the Tahoe and like the Canyon and Colorado,” he continued. “You can see that the vehicles are much improved over what they’ve offered in the past.”

Those with a keen eye that follow KBB’s resale values will notice a first-time inclusion on the list: Tesla.

Ibara says that used-car transaction data for Tesla, up until recent times, was a bit hard to come by. But now that the situation has been rectified, as Ibara put it, KBB is noticing that Tesla’s Model S isn’t seeing as hard a hit in the used market as the rest of the electric vehicle segment is currently experiencing.

“The electric vehicle segment is very interesting,” Ibara said. “We are seeing EVs depreciate much faster than their gasoline-engine counterparts, where one exists. We think it’s a function of the federal tax credit that all these vehicles qualify for and we also think that the early adopters who are buying the electric vehicles want a new car. We don’t see a lot of early adopters gravitating toward used electric vehicles and as a result their depreciation is very steep, for the most part. The Model S is an exception to this rule.”

So what’s a “safe” segment to invest in, as a used-vehicle dealer? KBB expects for trucks and sport utility vehicles to remain popular for years to come — a trend that Ibara says started before oil prices dropped the favorable level they are today.

“We think it’s a trend that will be around for a while,” he said. “Oil is trading around $35 a barrel right now, and there’s really no sign that it’s going to end that streak any time soon. We’re thinking that consumers will continue to prefer sport utility vehicles and that will make them more desirable five years down the road.”

Here's the full list of KBB's 2016 Best Resale Value Awards by vehicle category:

KBB's 2016 Best Resale Value: By Vehicle Category
SUBCOMPACT CAR: Honda Fit PLUG-IN VEHICLE: Tesla Model S
COMPACT CAR: Subaru Impreza COMPACT SUV/CROSSOVER: Jeep Wrangler
SPORTY COMPACT CAR: Subaru WRX MID-SIZE SUV/CROSSOVER: Toyota 4Runner
MID-SIZE CAR: Subaru Legacy FULL-SIZE SUV/CROSSOVER: Chevrolet Tahoe
FULL-SIZE CAR: Toyota Avalon LUXURY COMPACT SUV/CROSSOVER: Porsche Macan
ENTRY-LEVEL LUXURY CAR: Lexus RC LUXURY MID-SIZE SUV/CROSSOVER: Lexus GX 460
LUXURY CAR: Lexus GS LUXURY FULL-SIZE SUV/CROSSOVER: Lexus LX 570
HIGH-END LUXURY CAR: Porsche Panamera HYBRID SUV/CROSSOVER: Lexus RX 450h
SPORTS CAR: Chevrolet Camaro LT MID-SIZE PICKUP TRUCK: Toyota Tacoma
HIGH PERFORMANCE CAR: Chevrolet Camaro SS FULL-SIZE PICKUP TRUCK: Toyota Tundra
HYBRID/ALTERNATIVE ENERGY CAR: Lexus ES 300h MINIVAN/VAN: Toyota Sienna

‘Strong retail demand’ keeps auction prices high

CARMEL, Ind. - 

Looking back on November’s wholesale results, the picture painted is very much similar to previous months: Average auction prices were up month-over-month but flat year-over-year. And the uptick was largely due to truck prices.

Wholesale vehicle prices in November averaged $9,883, an increase of 1.1 percent compared to October. This was 0.1 percent higher than year-ago figures.

This was reflected in ADESA Analytical Services’ monthly analysis, provided by Tom Kontos, who pointed out in his Kontos Kommentary that the “strong retail demand,” especially in the certified pre-owned area, is what is maintaining the price levels despite the increasing supply.

“In short, data and other analysts are increasingly validating comments made here for many months about inevitable price softness from growing used-vehicle supply,” Kontos said. “Also as noted repeatedly here, the major saving grace keeping prices from falling further and sooner has been strong retail demand, especially for certified pre-owned vehicles.”

Kontos also pointed out that the softer pricing conditions are hitting institutional consigners more than dealers, “who have the option of retailing vehicles and only wholesaling units for which they can obtain attractive sales prices.” He said this advantage was show via strong month-over-month and year-over-year auction performance for dealer consignors.

To that end, the results for November show that the average wholesale prices for used vehicles remarketed by manufacturers were up 3.1 percent month-over-month and 4.3 percent year-over-year — and Kontos drew attention to the fact that, “manufacturers held out for their asking prices by often selling less than 50 percent of the units offered.”

Looking at vehicles in the 3-year-old segment, which Kontos used as a proxy to represent off-lease vehicles, the prices were down 3.2 percent month-over-month in November, and 9 percent year-over-year.

Utilizing data provided by NADA, Kontos showed that used-vehicle sales by franchised dealers increased 4.1 percent year-over-year while independent dealers saw their sales increase by 5.4 percent, both of which were down month-over-month.

According to figures from Autodata, CPO sales decreased by 13.8 percent month-over-month in November and 4.7 percent on a year-over-year basis. Despite that drop, overall sales remain up 8.7 percent year-to-date.

What you can expect out of used & new sales this month

CARY, N.C. - 

Depending on whose forecast you subscribe to, new-vehicle sales this month may end up being the highest November has ever seen.

And the used-car market? Well, count on it to reach at least 2.7 million sales  and probably more, if projections from Edmunds.com and TrueCar hold firm.

Edmunds is forecasting 2.77 million used sales for the month, which would results in a seasonally adjusted annualized rate of 38.5 million. A month ago, there were 3.17 million used sales, with the SAAR at 37.9 million, according to Edmunds.

Over at TrueCar, analysts forecasted that November used sales could approach 2.71 million units, beating year-ago figures by 1 percent.

On the new-car side, TrueCar is predicting 1.35 million sales (including retail and fleet), which would be good for the best November ever. That would result in a total new-car SAAR of 18.6 million, a 2015 high. A year ago, the SAAR was 17.1 million, according to TrueCar.

“This continues to be a standout year for the industry, with November sales likely setting a monthly record,” Eric Lyman, TrueCar’s vice president of industry insights, said in an analysis. “Consumers are excited about Black Friday promotions and these month-long events appear to be resonating with car buyers. Brands that advertised early, Chevrolet, Hyundai, Jeep and Ram, are expected to outperform the industry.”

The forecast put together by J.D. Power and LMC Automotive has the total new-car sales figure close to 1.3 million for November and retail near 1.1 million, even with “a couple of calendar curveballs” that impacted the sales tally.

LMC also bumped its annual forecast for total new-car sales this year from 17.3 million to 17.5 million.

“U.S. auto sales are now clearly on the path to set a record in 2015, with volume we haven’t seen in 15 years,” Jeff Schuster, senior vice president of forecasting at LMC Automotive, said in an analysis. “Even with the strong possibility for the Fed to increase interest rates, growth should continue into 2016, with sales expected to reach 17.8 million units.”

For November, Kelley Blue Book has a similar forecast (1.3 million sales for the month, with a 17.8 million SAAR) and pointed out the expected boost from Black Friday, but its analysis emphasizes the incentive spending that’s going on.

“Black Friday deals on vehicles have grown in popularity in recent years, and should be a big contributor to this month’s sales results,” KBB analyst Tim Fleming said in the report.  “However, industry incentive spending has been on the rise in recent months, topping $3,000 on average since July 2015, so we are carefully watching to see whether consumer demand can sustain such high sales levels without elevated manufacturer spending.”

KBB’s report also notes the “calendar quirk” (two fewer selling days year-over-year) which it says leads to November remaining static year-ago figures. However, KBB says the 1.3 million sales it is forecasting would be the best November since 2011. Not to mention, the 17.4 million total new sales for 2015 it is projecting would be a best-ever year.

As for Edmunds, it pinpoints the November sum at more than 1.33 million, with the estimated SAAR at 18.3 million. If that happens, the company says, each would be a November record.

Again, Black Friday could be a big reason why, Edmunds director of industry analysis Jessica Caldwell explains.

“Not even a decade ago, November was a notoriously slow sales month, and it typically ranked as the third worst month for sales in the calendar year. But in recent years, car dealers have joined other retailers to embrace Black Friday as a big sales driver,” Caldwell said.

“Since 2010, November has delivered one of the three best SAARs in each year, and last year, Thanksgiving weekend accounted for twice as many sales as any other weekend in November,” she added. “We expect to see both trends continue this year.”

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