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Delayed tax refunds impact March wholesale prices

Based on how the flow of tax refunds impact the used-vehicle market, Cox Automotive wasn’t surprised by the movement of wholesale prices in March.

According to Manheim Used Vehicle Value Index — a measure of wholesale prices adjusted for mix, mileage and season — wholesale used-vehicle prices decreased slightly in March compared to February. But March prices climbed 5.4 percent from year-ago levels.

At 130.8, the index is at its lowest level since July 2017, a point just prior to when Hurricanes Harvey and Irma began to impact the market.

“The marginal price decline in March was not significant,” said Jonathan Smoke, chief economist for Cox Automotive. “The slight decline in the seasonally-adjusted index value was the result of the adjustment process expecting more of an increase in March, but delays in tax refunds have shifted the peak of used-car demand by several weeks.

“Looking ahead, we are expecting strong pricing in April and May, as tax refunds more fully impact the used-car market,” Smoke continued.

Delving deeper into the March wholesale data, analysts found several segments with prices moving higher.

In fact, Manheim noticed every vehicle segment posted wholesale price increases compared to last year, with an especially strong gain once again in vans. First quarter wholesale price trends for all segments included: 

— Compact car prices represent significant strength, with a 5.4 percent increase over 2017. That’s even more than the typically strong SUV/crossover segment.

— The midsize car segment was the weakest performer, but unlike previous quarters, the segment did not experience a decline, posting instead an increase of 0.9 percent over 2017.

— Pick-ups and vans both showed strength, with vans increasing significantly thanks to a 13.4-percent gain compared with March of last year. Manheim added that pick-ups had a comparatively modest increase of 5.5 percent.

 —Wholesale pricing for SUVs and crossovers underperformed the overall market, increasing 5.1 percent from last year. Analysts explained the underperformance is likely due to an increasing supply of used SUVs and more aggressive pricing and incentive spending on new inventory.

— Luxury car values once again underperformed the overall market, increasing 4.1 percent over the same period last year.

Also of note, Manheim determined rental-risk pricing strengthened in March, with the average price for rental-risk units sold at auction up 7 percent over last year and 4 percent compared to February.

Analysts added the average mileage of 45,000 for rental-risk units in March was 13 percent higher than last year.

Correlating the used-vehicle market with the tax calendar

After plowing through the March wholesale pricing data, Cox Automotive returned back to a discussion about IRS activities and a recap of how retail sales landed in March.

Historically, Cox Automotive acknowledged used-vehicle sales in the U.S. have peaked in the weeks following the peak in tax refunds. Starting in 2017, however, the IRS delayed the point when households with eligible tax credits could file tax returns. This resulted in refunds being delayed by approximately four weeks, impacting used-vehicle sales and pricing.

“This same situation is impacting 2018, as well,” analysts said.

Used-vehicle sales in March increased 1 percent over year-ago levels, according to Cox Automotive estimates, with the month’s seasonally adjusted annual rate (SAAR) for used vehicles rounding out at 39.5 million units.

Since 2009, the average March increase relative to February in the Manheim Used Vehicle Value Index has been 3.5 percent, just slightly higher than the March 2018 unadjusted increase of 3.4 percent.

Analysts explained the historical bump in March pricing has been driven by an increase in used-vehicle demand driven by earlier tax refunds.

“The seasonal-adjustment process still expects to see this historical pattern in used-vehicle values,” Cox Automotive said. “As a result, the seasonally adjusted value for March registered the slight 0.15 percent decline.”

Through the week of March 23, Cox Automotive mentioned the cumulative number of refunds in 2018 is down 1 percent compared to 2017.

“The weekly trend in refunds, however, relative to last year, is now trending up, with experts predicting a stronger price trend in April as retail used-car demand will likely peak for the year,” analysts added.

Meanwhile, on the new-car side, Cox Automotive recapped that new-vehicle sales increased 6 percent year-over-year in March, coming in far stronger than forecast and surprising most analysts and experts.

The March 2018 new-vehicle SAAR of 17.4 million, up from 16.7 million in 2017, marked the seventh straight month of more than 17 million SAAR and the third best March on record.

“Cars continue to experience sharp declines in the market, with sales last month falling 9 percent compared to year-earlier levels. Trucks and SUVs continued to gain share,” analysts said.

The latest commentary from Comerica Bank also touched on new-vehicle sales, noting how challenging it is to project future figures.

“Forecasting auto sales is now a two-handed argument,” Comerica Bank chief economist Robert Dye said.

“On the one hand, strong economic conditions are supportive of ongoing auto sales,” Dye continued. “On the other hand, sales were declining through the first eight months of 2017, then came the surge in sales in September as a result of hurricane damage along Gulf Coast.

“We expect to see gradually easing auto sales this year,” he added.

Trends and economic momentum

Cox Automotive closed its latest index update by noting some general economic news.

Analysts mentioned the fourth quarter's real GDP growth rate was revised upward to 2.9 percent from its previous 2.5 percent.

“Expectations remain for a continuation of accelerated growth this year due in part to increased consumer spending and business investment resulting from recent tax reform,” Cox Automotive said.

“Despite consumer confidence last month experiencing a moderate decline from a 17-year high in February, largely due to stock market volatility, consumer spending expectations remain high due to tax cuts, strong wage growth and the robust labor market,” the company went on to say.

Dye also discussed an important component in dealerships turning vehicles — their customers having a job to generate income and pay their installment contract.

Dye explained the official federal employment data for March was “eye-catching” as firms increased employment by just 103,000 jobs on net, “well below consensus expectations” of about 185,000 for the month. He pointed out the miss in March payrolls comes on the heels of a robust 326,000 job gain in February.

“The March slump looks like mean reversion right now,” Dye said. “If it is followed by a weak April, that is another story, but other indicators point to ongoing moderate job growth this spring.

“The unemployment rate stayed at 4.1 percent for the sixth consecutive month,” he continued. “We still expect it to edge lower, but the rate of decline has clearly eased.

“Average hourly earnings increased by 0.3 percent for the month and are up 2.7 percent over the previous year,” Dye went on to say.

Kontos pinpoints 2017 used-sales total and February wholesale price shifts

Along with recapping some of the full-year used-vehicle metrics he discussed during NADA Show 2018, KAR Auction Services chief economist Tom Kontos also pinpointed wholesale price movements for February.

According to ADESA Analytical Services’ monthly analysis of wholesale used-vehicle prices by vehicle model class, wholesale used-vehicle prices in February averaged $10,707, which was 2.5 percent lower compared to January and 0.2 percent higher relative to February 2017.

Kontos noted that sporty cars made the highest price jump in February, climbing by 4.5 percent.

He added that decliners were paced by full-size cars, which softened by 6.6 percent.

According to his presentation shared during the annual event hosted by the National Automobile Dealers Association, there was a 2.0-percent lift in used-vehicle transactions in 2017. The combination of turns at franchised and independent stores as well as deals made by private parties resulted in 41.38 million used-vehicle sales last year, according to Kontos.

The 2017 figure represented a jump of 827,000 units, with private sales constituting more than half of that amount. Here is a breakdown of the full-year figure:

— Sales at franchised dealerships: 15.1 million

— Sales at independent dealerships: 14.1 million

— Private party transactions: 12.1 million

Also of note within Kontos’ NADA material, the KAR expert mentioned how 2017 also marked a significant drop if sales into rental fleets. Last year, the industry saw a drop-off of 12.3 percent or 222,544 units go into the rental market.

Still, Kontos indicated automakers still sent 1,592,380 new vehicles into rental fleets in 2017.

And one other full-year metric Kontos shared focused on sales volume by seller type. Fleet/lease consignors posted a 10.3 percent year-over-year volume lift in 2017 while manufacturers sustained a softening of 14.7 percent. Kontos also pegged dealer consignment volume as being down by 4.0 percent year-over year.

“Dealer consignment volumes are down as dealers take fewer new-car trades,” Kontos said in his presentation. “Declining manufacturer volumes reflect lower rental sales and recall delays. Off-lease and repo volumes are reflected in growing fleet/lease sales.”

Source: ADESA Analytical Services.

Shift to utilize Manheim auctions for physical car tasks

For automotive upstarts like Shift Technologies, the retailing may be digital, but the meat-and-potatoes logistics of operating an enterprise are still very much physical.

And especially when it comes to scaling that model. That often means a great deal of overhead, something Shift is looking to alleviate through a partnership with Cox Automotive that can help the online retailer expand to new markets more efficiently.  

With this partnership, announced Wednesday, the online retailer is leaning on Cox’s Manheim auctions to take care of those boots-on-the-ground physical logistics — reconditioning, marshaling, storing cars, etc. — that come with retailing vehicles, as it expands.

“We’re excited to partner with Cox, which enables us to provide more consumers access to Shift’s platform and services,” Shift chief executive George Arison said in a news release.

“By removing the need for us to lease facilities, build systems and recruit teams for physical vehicle needs, we will significantly reduce our upfront investments and can instead focus on building incredible technology that makes car buying and selling simpler,” he said.

Shift tested this arrangement out at Manheim San Diego, which it used for vehicle storage, reconditioning, imaging, inspections and detailing, just to name a few tasks. It currently keeps 300 cars at that auction and is considering expanding into markets where Manheim has a presence.

“There are many new players with innovative technology platforms entering the market, yet they still require physical infrastructure,” said David Liniado, Cox Autmotive’s vice president of new growth and development, in a news release.

“Our partnership with Shift is an example of how Cox Automotive can nurture and accelerate their go-to-market proposition or expand their footprint and inventory volume by incrementally leveraging our assets,” he said.  

Arison added: “Thanks to Manheim, we’re transitioning to a nimbler business model. Manheim’s national network and deep remarketing expertise, as well as solutions provided by other Cox Automotive brands, are integral to Shift’s plans.”

Deadline soon: Best Auto Auctions to Work For

It’s that time of year again — time to proudly state that you work at one of the finest auto auctions in the nation.

Auto Remarketing invites you to participate in the third annual workplace study recognizing the best employers in the auction industry — Best Auto Auctions to Work For 2018, sponsored by CARS Recon, Inc. This year is especially exciting, because for the first time, we’re expanding the program to include a new, additional study that will feature nominations from online auctions.

Top auctions participating in this FREE study will be recognized in the Sept. 15 edition of Auto Remarketing and at a special Best Auto Auctions to Work For recognition breakfast during Used Car Week, happening Nov. 12–16 at the Westin Kierland Resort in Scottsdale, Ariz., in partnership with the NAAA Convention.

For individual auction locations to participate, the general manager/leader of your auction needs to opt in by April 20 at the Best Auto Auctions to Work For website. We’ve worked to make this year’s study quicker and easier for all.

Share your stories of success, team players and leaders that make your auction a great place to work, and good luck to you all!

Lane watch: Car prices stay strong

Along with its monthly update on the specialty markets, the latest Black Book Market Insights report showed that cars are seeing gains they haven’t reached in a while.

Editors noticed only two car segments — luxury and premium sporty — declined this past week. Editors added that a few truck segments also saw gains, but most were in decline.

“Two weeks of positive changes in car values as springtime buying continues with full force,” said Anil Goyal, executive vice president of operations at Black Book.

Volume-weighted, Black Book determined overall car segment values increased by 0.23 percent last week. In comparison, the market values had increased by 0.26 percent during the previous week.

Within cars, editors indicated all non-luxury segments performed well with values seeing an increase ranging from $21 to $47.

Again volume-weighted, Black Book reported that overall truck segment values (including pickups, SUVs and vans) decreased by 0.20 percent last week, slightly worse than when editors spotted a decrease of 0.19 percent in the prior week.

In trucks, editors said the compact luxury crossover/SUV and full-size pickup segments performed the worst.

Turning next to what Black Book’s representatives in the lanes noticed, one upbeat anecdote came an auction general manager in Texas.

“The last two weeks have been really, really good for our auction. We have had good vehicle volumes, and for two straight weeks our sales percentages have been in the mid-60s,” the auction GM told Black Book’s lane watcher.

Another positive development percolated in Florida.

“The rental and off-lease lanes always do better than the dealer lanes, but today they performed even better,” Black Book’s representative in the Sunshine State reported. “The dealer reps were holding out for more money, which hurt their sales percentage.”

The other three observations collected by Black Book showed how diverse the auction space can be on sale day.

— From Pennsylvania: “We had a mixed bag with an abundance of passenger cars and a shortage of trucks. This imbalance caused truck prices to be really strong.”

— From Colorado: “There were fewer vehicles to choose from today, which pushed the values up from previous weeks. Our market remains strong.”

— From Wisconsin: “The sales percentage was good, even though both buyers and sellers seemed to be more selective.”

Update on the specialty markets

As they do at the top of each month, Black Book editors assembled their analysis of the specialty markets. Here is what they had to share:

— Collectible Cars: The main events of the Amelia Island Concours d’Elegance were supported by auctions hosted by RM Sotheby’s, Bonhams, Gooding, Hollywood Wheels and Motostalgia.

— Recreational Vehicles: RV values at auction, including all towable and motorized vehicle segments, increased last month.

— Powersports: After last month’s rather large, but uneven, gains, the powersports market settles into a more typical pattern of price adjustments as spring has officially begun.

— Heavy Duty: New truck orders, primarily over the road and regional tractors, are at a high level and lead times are increasing for the current year.

— Medium Duty: This past month, Black Book saw wholesale prices drop a little more than we experienced in January and February, returning to a more normal monthly depreciation. Late model units (2015-2016) dropped an overall weighted average of $254 (0.6 percent).

Alliance Auto Auctions partners with Floorplan Xpress

According to a news release issued on Monday, Floorplan Xpress, a nationwide auto dealer floorplan company serving 26 states across the country, is now servicing the accounts for Alliance Auto Auction’s Dealers Credit Express, a Texas-based floorplan provider.

Officials highlighted this development should greatly enhance the footprint of both companies. Floorplan Xpress has since provided inventory financing solutions for dealers since 1974. It has 24 branch offices throughout the United States, with its headquarters located in Moore, Okla.

Alliance Auto Auctions started Dealers Credit Express in 2015 to provide its dealer base with a better flooring experience.  The Alliance Auto Auction chain of auto auctions based in central and east Texas provides floor plan services at 23 auctions, in Texas, Louisiana and Oklahoma.

“Dealers will see improvements in our offerings and customer service in the months ahead as the benefits of the partnership are realized,” said Tim Adams, chief executive officer of Alliance Auto Auctions.

“I believe what makes Alliance stand out in today’s marketplace is our ability to understand the unique needs of our dealers. This is a result of working closely with them to build mutually beneficial relationships and striving to help one another achieve our goals.” Adams continued.

The mottos of the two firms are similar. The Floorplan Xpress motto is “Inventory Financing made Simple.” while Dealers Credit Express’ motto is “Simple, Fast and Convenient.”

Today, Floorplan Xpress serves thousands of independent auto retailers from branch offices in 26 states.

Adams went on to say, “The partnership comes at a great time as it coincides with growth and expansion of the auction chain, and a very strong market for independent auto retailers.”

More information is available at www.fpxus.com as well as allianceautoauction.com.

New Car Keys Express affiliate program welcomes businesses, consumers nationwide

In pursuit of new partners nationwide, Car Keys Express recently introduced an affiliate program for businesses and consumers.

As part of the new Car Keys Express Affiliate Program, participants can earn commission up to 10 percent for all purchases made using their unique referral link provided by the company.

Each affiliate receives a shareable link for their audience to use that may be shared digitally or through social and print media.

“Creating partnerships with businesses and individuals allows them to market our service and earn commissions in return. The program opens an opportunity to create a significant revenue stream.” Car Keys Express founder and chief executive officer Mark Lanwehr said in a news release.

The company said affiliates can also earn a multi-tier commission for sales made by individuals or businesses they may refer to the new program.

“Since 2008, we've been revolutionizing the key replacement industry with our mobile, discount service,” said Lanwehr. “We grew rapidly by providing consumers an alternative to the time, expense, and hassle of a dealership service appointment.

"The Car Keys Express Affiliate Program is yet another innovation," he went on to say.

Successful affiliates include online and brick-and-mortar retailers, publications, bloggers, social influencers, and podcast hosts. 

Black Book spots strongest week for used cars in 2 years

Americans still have about two weeks to file their federal income taxes with the Internal Revenue Service, but consumers who already have completed the process are leaving an impact in the lanes.

The latest Black Book Market Insights report highlighted that the market for cars — particularly smaller models — continues to strengthen throughout the spring season to that point editors declared last week was the strongest week for used cars in two years.

“Very strong week in car values led by compact cars. Tax season demand continues to be strong,” said Anil Goyal, executive vice president of operations at Black Book.

Volume-weighted, Black Book indicated overall car segment values increased by 0.26 percent last week. In comparison, the market values had decreased on average by 0.11 percent per week in the previous four weeks.

As Goyal mentioned, the compact car segments increased the most in value last week, rising by 0.89 percent or $61.

Volume-weighted, editors determined that overall truck segment values — including pickups, SUVs and vans — decreased by 0.19 percent last week. In comparison, editors pointed out the market values for trucks had decreased on average by 0.22 percent per week during the previous four weeks.

Within trucks, Black Book found that the sub-compact crossover segment increased the most in value last week, ticking up by 0.18 percent or $20.

Turning next to what Black Book’s representatives stationed at auctions across the country observed, two particular trends surfaced in the Southeast.

Out of Georgia, the lane watcher reported, “There was a good crowd and the demand was strong, which resulted in very few no-sales. I had one dealer tell me that he was looking to purchase in excess of 30 vehicles at the auction.”

Meanwhile down in Florida, “Off-lease and rental vehicles performed well, as did units in the $10,000 price range.”

Moving north to Pennsylvania, used-car managers find themselves in a bit of a quandary.

“There is an imbalance with the supply/demand equation here. Dealers continue to complain that they can’t find enough vehicles for inventory,” Black Book’s representative shared.

Finally out West, the situation is rather upbeat, too.

The report out of Nevada indicated, “The market here is good. We are experiencing very high activity levels both online and on-site.”

And the mood in Colorado was, “We had another strong sale here with more vehicles selling without regard to the vehicle type or make.”

Black Book valuations chosen for Roush Performance Products

In other company news, Black Book announced this week that the firm has signed an agreement to provide vehicle valuation data for ROUSH Performance Products, a company offering an extensive line of aftermarket performance parts, vehicles and crate engines.

ROUSH Performance blends Jack Roush's legendary racing successes with the formidable OEM engineering and manufacturing skills of ROUSH Industries and its more than 4,000 employees. ROUSH Performance is the first specialty-vehicle company to combine race-proven technologies with advanced automotive engineering.

ROUSH dealers can now leverage Black Book’s legacy of accurate vehicle valuations, available on the Black Book Digital mobile application or online.

With Black Book’s valuations, ROUSH dealers can instill trust in their customers that their transaction comes with an accurate, fair value. Dealers can also fully finance the purchase of a new ROUSH vehicle, offering credible value to lenders and making it easier for buyers to gain financing.

Lastly, Black Book wants to enhance satisfaction levels for ROUSH vehicle owners helping them achieve fair value for their vehicles when they’re ready for resale.

“We’ve always taken pride in the supreme quality of vehicles our dealers offer their customers, and with Black Book we take extreme pride in the quality of our deals,” said Jack Roush Jr., who oversees advanced business strategy at ROUSH. “Our customers want to know they’re getting the best vehicle on the road today, and they also want to know it comes with the most accurate valuation in the industry.”

Jared Kalfus, executive vice president of revenue, for Black Book, added, “We’re excited to offer our trusted vehicle valuation data and services to an industry icon in ROUSH, known for high performance vehicles.

“The ROUSH name is synonymous with trust and quality, and we’re proud to know that Black Book’s values will help enhance their customer relationships even further, solidifying that trust between the dealer and customer,” Kalfus went on to say.

Southeastern AA of Savannah culminates 10-week campaign with gift to Shriners Hospital for Children

Dealers and consignors made plenty of transactions, but the organization that really cashed in recently at Southeastern Auto Auction of Savannah was Shriners Hospital for Children.

Southeastern Auto Auction of Savannah raised more than $10,000 for Shriners Hospital for Children and gave away more than $25,000 in cash and prizes to its dealer clients who participated in the auction’s fourth annual “Cars, Cash & Caring” celebration, a 10-week long event.

Auction management highlighted the Cars, Cash & Caring events were held during the auction’s weekly wholesale sales on Wednesdays and public sales held on Thursdays with the conclusion occurring on March 21 with more than 1,000 units offered. 

“The ‘Cars’ portion of the event features 10 weeks of auction sales featuring thousands of units run through our lanes,” said Bill McCready, vice president of operations.

“The ‘Cash’ refers to the cash and prizes totaling more than $25,000 as a way to thank our loyal customer base,” McCready continued. “The ‘Caring’ is the money we’ve raised from donations and 50/50 drawings throughout the year for Shriners Hospital.”

McCready said the auction was able to raise funds through the generosity of its dealers and vendors, as well as the hard work of the Southeastern team.

“We have made it our goal to blow past $10,000 and raise even more for the hospital in 2018,” he added.

Shriners Hospital for Children is committed to providing the best care for children in the specialty areas of orthopedics, burn care, spinal cord injury and cleft lip and palate, regardless of the family’s ability to pay.

Back in 1987, Wayne DeLoach, Tommy Childs, and Danny Williams purchased what was then a public auction. Today, the four-lane, wholesale auction typically runs 700 units per week with more than 350 dealer attendees. More dealers attend online using Simulcast and Edge Pipeline.

Southeastern also hosts a public sale each Thursday when about 200 units are run.

For more information, visit www.southeasternaa.com.

CPS honors 2 Missouri auctions

Two independent auctions collected accolades from a consignor that specializes in originating contracts within the subprime credit space.

Consumer Portfolio Services announced its 2017 auction award winners during a private ceremony at the CAR Conference earlier this month in Las Vegas.

This year’s CPS Top Gun Award as the finance company’s Auction of the Year was awarded to 166 Auto Auction from Springfield, Mo. To qualify for this award, the finance company indicated the auction must finish the year in the top 5 for large CPS volume sales in retention, then go through the voting process of the entire internal and external CPS remarketing teams.

CPS became partners with 166 AA in late 2014 and since then, 166 AA has gone on to receive the Operational Excellence Award in 2015 and the CPS Heavy Hammer Award in 2016 prior to earning the 2017 CPS Top Gun Award.

Ace Tetlow, assistant general manager at 166 AA, said, “The team at 166 Auto Auction is honored to receive this award and grateful for the partnership we have with CPS, truly a great company to partner with at the auction level.”

The 2017 CPS Heavy Hammer Award for highest sales retention went to KCI-Kansas City Independent Auto Auction of Kansas City, Mo. The Heavy Hammer Award is awarded to one CPS partner auction in the nation who achieved the highest sales retention for the entire year.

This was KCI’s first CPS auction award after coming extremely close on many other occasions.

“It’s an honor for our KCI team to achieve this award from CPS,” said Jennifer Leocardi, who is vice president of national sales for McConkey Auction Group. “All year long, we’re discussing and implementing ways to continue to build the best market for CPS vehicles, and we have obviously set the bar high.”

CPS remarketing manager Mike Scott added, “We are extremely proud to honor our top performing auctions each year through the auction award/recognition program.

“For the 2017 awards, we saw some familiar faces at the ceremony along with many auctions earning their first CPS award,” Scott went on to say. “The competition the program creates for the auctions is terrific and to watch the auctions compete throughout the year, inquiring about how they stack up to their competition, is a testament to the commitment these auctions have to the success of CPS in the remarketing world.”