While Manheim noticed record-setting metrics again for its latest monthly report, Black Book on Tuesday released its Used Vehicle Retention Index for June and observed a more modest sequential uptick and even a decline compared to a year ago.
Black Book found that its index edged higher to 113.0 in June, up from 112.3 in May. On a 12-month basis, the index dropped 4.5 percent compared last June.
Editors recapped that the Black Book Used Vehicle Retention Index is calculated using Black Book’s published wholesale average value on 2- to 6-year-old used vehicles, as percent of original typically equipped MSRP.
Perhaps not record-setting, Black Book acknowledged the Index rose for the second time in the past three months. It increased slightly in April due to a stronger-than-expected spring selling season for used vehicles, and it saw gains in June largely because falling gas prices helped with the sale of used trucks, crossovers and SUVs.
Despite these gains, editors pointed out that falling gas prices also meant a continuation of accelerated depreciation for subcompact and compact cars.
“In addition to falling gas prices, which are playing a role in driving a little more interest for certain trucks today, there are generally some very good deals out there for used vehicles currently,” said Anil Goyal, senior vice president of automotive valuation and analytics for Black Book.
“These are the primary reasons why we are seeing some bounce off the lows in used car retention trends,” Goyal continued.
The Index dates back to January 2005, where Black Book published a benchmark index value of 100.0 for the market. During 2008, the index dropped by 14.1 percent while during 2016, the index fell by just 6.4 percent.
During 2011, the index rose strongly from 113.3 to 123.0 by the end of the year as the economy picked up steam and used vehicle values rose higher. It continued to remain relatively stable, rising slightly until May of 2014 when it hit a peak of 128.1.
To obtain a copy of the latest Black Book Wholesale Value Index, go to this website.
Make it two consecutive months where the Manheim Used Vehicle Value Index established a new record.
Analysts determined wholesale used vehicle prices (on a mix-, mileage- and seasonally adjusted basis) increased 1.1 percent month-over-month in June. This movement brought the index reading to 129.3, which was a record high for the second consecutive month and represented a 2.5 percent increase from a year ago.
“Like May, the June index result challenges concerns that increasing wholesale supplies from near-peak-off-lease volumes and rising rental volumes would lead to rapidly declining used car values,” Cox Automotive chief economist Jonathan Smoke said in commentary associated with the latest index update.
“Instead, strong retail demand for recent model year used vehicles is encouraging dealers to buy more vehicles from auction heading into the summer. The increased demand is more than offsetting the higher supply,” Smoke continued.
“The volume of transactions is up more dramatically than supply thanks to real demand from dealers and, in turn, consumers,” Smoke went on to say. “Broadly speaking, the second quarter was supported by continued low unemployment and strong consumer confidence remaining near a 16-year high.”
Fueling the year-over-year rise were prices for pickups and vans, which rose by 7.5 percent and 7.4 percent, respectively. Manheim’s index report also pointed out price rises for SUVs and CUVs (up 2.0 percent) as well as luxury cars (up 1.4 percent).
Falling year-over-year were both compact cars (down 0.4 percent) and midsize cars (down 2.1 percent).
Sliding over the rental market, Manheim noted that rental risk pricing eases, thanks in part to higher volume.
Analysts found that the average price for rental risk units sold at auction in June softened by 4 percent year-over-year, but rental risk prices ticked up 0.2 percent compared to May.
Manheim also mentioned SUVs and CUVs accounted for 32 percent of rental risk sales in June of this year versus 30 percent last June. The share of compact cars fell from 25 percent to 23 percent.
Analysts added that average mileage for rental risk units in June came in at 40,600 miles, an amount 2 percent below a year ago.
Editor’s note: More commentary and analysis from Smoke’s first quarterly conference call will appear in future reports from Auto Remarketing.
Well, the convergence of cars and trucks depreciating at the same rate lasted all of a week.
The newest Black Book Market Insights report showed truck segments deprecating only by 0.9 percent last week, much less that in comparison with the car segments, which depreciated by 0.31 percent overall.
In fact, editors noticed three specific truck segments increased their value, including the full-size van, small pickup and full-size pickup.
Black Book also mentioned the recent truck performance produced a better than the average decrease since the firm spotted depreciation of 0.17 percent per week during the previous four weeks.
While those three truck segments saw an uptick, sub-compact luxury crossover/SUV and compact luxury crossover/SUV values dropped the most by 0.37 percent and 0.27 percent, respectively.
Over on the car side, looking at volume-weighted data, editors reiterated that overall car segment values declined by 0.31 percent last week. In comparison, the market values had decreased on average by 0.35 percent per week in the previous four weeks.
Within car segments, Black Book noted sub-compact car and compact car segments performed the worst, decreasing by 0.52 percent and 0.85 percent, respectively.
“Higher depreciation continued in sub-compact car and compact car segments driven by recent drop in gasoline prices. The average U.S. gas price per gallon has dropped by over 10 cents in the last three weeks,” said Anil Goyal, Black Book’s senior vice president of automotive valuation and analytics.
When Black Book’s representatives in the lanes reported back to headquarters, the dealer chatter continued to focus on trucks. And it came from both ends of the country.
First in North Carolina, “Had a lot of comments about high prices from dealers trying to buy nice, low mileage trucks.”
Then in Washington, “Pickup trucks are still king here. Mid-size and compact sedans struggled more than the past few weeks.”
The other anecdotes gave an indication of where dealers stand as the Fourth of July passed.
From Texas: “Dealers say they are building inventory around the July 4th holiday.”
In Colorado: “The dealers say they need inventory and are searching all of the resources to find their type of vehicles.”
And finally in Pennsylvania: “Most of the sales resulted from online buyers, as there weren’t many people in the lanes.”
In the past, Manheim has hosted mobile auctions in some pretty unique locations — dealership lots, convention centers, NASCAR race tracks, even a minor league baseball park — but the company insisted the latest location tops them all.
Recently, Manheim UK held what is believed to be the first vehicle auction at sea. The unique mobile sale for Citroën was held on No Man’s Fort, a 150-year-old facility off the coast of the Isle of Wight near Portsmouth, England.
Manheim shared that the logistical challenges of moving all of the special offsite auction equipment, along with Citroën’s guests and the Manheim team, from the mainland to a 150-year-old fort in the middle of the Solent was “incredibly” successful, with 100 percent of the 225 vehicles offered selling for 100 percent of their reserve prices.
The company highlighted that No Man’s Fort dates from the 1860s, when building work started on a number of military forts in the Solent to protect the United Kingdom from a potential French invasion. Having been decommissioned after World War II, No Man’s Fort was bought by its current owners in 2012 and converted into a luxury hotel and function venue.
Paul Drake, remarketing manager for Citroën UK, said: “There are some things in life you never forget and this truly has to be one of them. Not only was the auction itself a huge success, but it was one of, if not the best, event to which I have ever invited our dealers. It was an incredible experience and I’m not sure how we will ever top it.”
Tim Hudson, managing director of inventory solutions at Cox Automotive, added: “We have truly led the market with our pioneering offsite sales, supported by our unique mobile auction proposition. Having partnered with Citroën UK for the first ever offsite outdoor sale in the U.K. in 2015, we are delighted to have broken new boundaries with them again with what we believe to be the first ever sale held ‘at sea.’
“I’m incredibly proud of the result, but most importantly the incredible support provided by our team members to facilitate such a special sale,” Hudson went on to say.
With fireworks popping because of the Fourth of July, Auction Management Solutions is celebrating too, and not just for patriotic reasons, as the consulting firm started by industry veterans Tom Stewart and Richard Curtis has reached its one-year anniversary.
This past year, AMS highlighted that it has seen explosive growth in its core business of providing consulting services to the automotive industry, including but not limited to independent auto auctions, service providers and vendors.
“Richard and I are humbled by the success we have achieved in such a short period of time,” Stewart said. “We started this firm to deepen relationships between consignors and our clients, and to illustrate that independent auctions can and will continue to provide all the services consignors have come to expect.”
AMS is committed to have a singular focus of working closely with our client partners, helping them in various ways to be successful within the remarketing industry.
“If our clients are successful due to our assistance, then obviously we have been doing our job correctly,” Stewart said. “We also want the industry to know that working with our firm or an AMS client partner insures you will receive dedicated and superior service.”
AMS currently represents 17 auctions across 14 states, with new locations being added steadily. The main focus of AMS is to provide strategic business development services, with an emphasis on processes, profitability and exposure that aid in the growth and success of the client/partners.
“It is our intent to keep our clients on the forefront of the automotive remarketing industry by maintaining a comprehensive and competitive suite of services,” Curtis added.
To maintain quality service levels and keep pace with the continual growth of the client/partner businesses, AMS previously announced the addition of two strong additions to their staff.
Jamye Carpenter was brought on board in April as vice president of business development. Carpenter brings with her a wealth of automotive experience and knowledge in the many facets of the business.
In addition, AMS has recently added Shelly Frank to its team. Based on the West Coast, Frank joins AMS with more than 25 years of experience in the auto finance and wholesale auto auction industry. Frank previously served as loss mitigation operation manager of Fireside Bank, and as vice president of business development with North Bay Auto Auction.
While presently continuing to work with NBAA on projects as a consultant, Frank has also been active in the Western Chapter of the National Auto Auction Association.
“Both of these women bring years of experience, a wealth of industry knowledge, and contribute diverse areas of expertise to the team, allowing AMS to provide all manners of service to our partners,” Stewart said.
“AMS looks forward to many successful years of working with our clients and providing services to, and for, the entire industry,” Stewart went on to say.
Since launching its Auction Safety Certification and Lane Safety Training series 14 months ago, the National Auto Auction Association said that more than 7,000 people within the industry have been certified under the safety program.
The courses, NAAA said in a news release on Thursday, include educational videos that aim to promote safety and prevent accidents. The program includes a multiple tiers to cater to full- and part-time auction employees.
“Because busy auto auctions have the potential to be hazardous, especially for those unaccustomed to the work environment, our program addresses improving safe practices with the industry's many part-time employees and contractors as well as regular staff,” NAAA chief executive officer Frank Hackett said in a news release. “While we're pleased that more than 7,000 people have been trained, our ultimate goal is one hundred percent employee certification at every auction.”
The association also has a “100 Percent Safety Certified Award” to spotlight auctions who have had all of their employees finish the program.
The Auction Safety Certification course includes 12 videos and a quiz after each video. NAAA estimates the course takes an hour.
The Lane Safety Training is a 20-minute course and test given to temporary agency drivers.
Annual renewals are required of the certification.
“The training and education of each employee becomes paramount to their understanding the safest, most productive way to do the job, and a proactive safety program is one of the best ways to reduce risks and control costs from incidents involving employee injuries and property damage,” Hackett said. “That’s why we’re urging all NAAA member auctions to make one hundred percent safety certification of their staff a top priority.”
In addition to these programs, NAAA also includes an Auction Arena Safety Training for auctioneers.
With some upbeat signs in the lanes that dealers are preparing to move used metal as the summer heats up, the Black Book Market Insights report showed car and truck segments depreciating at the same level.
Editors determined that both overall segments softened by 0.25 percent last week. They also mentioned compact vans performed the best, increasing their value by 0.07 percent, while sporty cars saw no price declines during the week.
“Overall, the wholesale markets performed well last week. Weaker spots were seen in the sub-compact crossover and compact crossover/SUV segments,” said Anil Goyal, Black Book’s senior vice president of automotive valuation and analytics.
As mentioned, volume-weighted data showed overall car segment values decreased by 0.25 percent last week, lower than the average weekly decrease of 0.39 percent in values over the previous four weeks.
Black Book pointed out that prestige luxury car, midsize car and full-size car segments declined the most by 0.52 percent, 0.45 percent and 0.42 percent, respectively.
On the truck side, again, the volume-weighted information showed the overall segment values (including pickups, SUVs and vans) dipped by 0.25 percent last week, higher than the average weekly decrease of 0.18 percent in values over the previous four weeks.
As Goyal alluded to, sub-compact crossover, sub-compact luxury crossover and compact crossover/SUV decreased the most by 0.51 percent, 0.47 percent and 0.44 percent, respectively.
Turning next to Black Book’s representatives in the lanes, one of the most interesting anecdotes came from Pennsylvania.
“Was an OK sale here today. It was worth noting that most of the buyers were online and not in attendance,” Black Book’s auction watcher in the Keystone State said.
Sticking in the Northeast, the lane watcher in Massachusetts recapped, “Today’s auction was better than last week and prices were stable.”
Sliding over to the Midwest, the report out of Wisconsin noted, “Dealers were cherry picking today.” But in Indiana, the action was a little bit livelier.
“A good sale today but consignment was down again, which helped keep the values up. Dealers here are buying in order to have inventory for what is expected to be a decent summer market,” the Black Book representative stationed in the Hoosier State said.
Down in Texas, the scene was, “Prices are holding steady here as bidding was good, as was the number of consigned vehicles.”
Wrapping up the auction action roundup, Black Book’s observer in Florida added, “The commercial lanes did better today. The dealer lanes struggled with lots of no-sales.”
The National Auto Auction Association held a mock auction on Capitol Hill to interactively educate policymakers about the wholesale auction business and the role it plays in both the auto industry and the U.S. economy.
Staffers and legislative aides of the Senate Automotive Caucus joined NAAA in the Russell Senate Office Building on June 16, where NAAA first presented a 30-minute video depicting the entire auction process, such as vehicles arriving via transport truck, inspection, check-in, repair, painting and reconditioning and sales day bidding.
For the mock auction, NAAA brought its audience an auctioneer, eight colorful quarter-scale cutouts of vehicles and stacks of ‘NAAA bucks.’
"We call it 'Wholesale Auto Auctions 101' because we want to give our lawmakers a solid understanding of how auctions operate and how integral they are to the industry," NAAA operations manager and legislative director Tricia Heon said in a news release. "Promoting and protecting the interests of our members and the industry requires proactively educating as well as advocating."
Senate Automotive Caucus chairman Sen. Rob Portman of Ohio arranged the meeting with NAAA.
The caucus provides a bipartisan forum for senators to exchange ideas and influence policy concerning issues that impact the auto industry, according to NAAA.
In attendance were staff from the offices of Sen. Sherrod Brown of Ohio, Sen. Joe Donnelly of Indiana, Sen. Al Franken of Minnesota, Sen. Patty Murray of Washington, Sen. James Risch of Idaho, and Sen. Luther Strange of Alabama.
U.S. Rep. Pat Tiberi of Ohio and chairman of the congressional Joint Economic Committee also sent representatives.
Following the mock auction, NAAA hosted a reception where staff had an opportunity to meet with NAAA members such as Independent Auction Group co-chair Charlotte Pyle and members from ADESA and Cox Automotive.
ADESA’s Paul Lips, Heather Greenawald, Elizabeth Murphy and NAAA President-elect Warren Clauss participated. And Cox Automotive members in attendance included Craig Amelung and Karyn Wrye.
"I was impressed with the genuine interest and enthusiasm shown by those who attended as well as by the support of the auto caucus," said Pyle, who served as ringman for the mock auction’s auctioneer John Nicholls. "It's rewarding to educate our lawmakers in Washington about our business."
Nicholls is the 2015 NAAA Auctioneer of the Year and president of the Nicholls Auction Marketing Group.
NAAA chief executive officer Frank Hackett, along with Heon and Sante Esposito, president of lobbying firm Key Advocates accompanied the NAAA member delegation for the Capitol Hill visit.
"We received a lot of positive feedback about our program and about returning to do another in the future," Hackett said.
With dealer consignment activity softening for a variety of reasons, the newest Black Book Market Insights report showed that small cars continue to feel heavy depreciation.
And editors added that small crossovers are also sustaining larger valuation drops, as well.
Out of all vehicle categories within the car segment, the report indicated sub-compact cars declined the most, dropping by 0.68 percent.
“The smallest vehicles, including sub-compact car, sub-compact crossover and sub-compact luxury crossover, have experienced heavier depreciation levels as gas prices remain low,” said Anil Goyal, Black Book’s senior vice president of automotive valuation and analytics.
Reviewing volume-weighted data, Black Book found that overall car segment values decreased by 0.35 percent last week, slightly lower than the average weekly decrease of 0.39 percent in values over the previous four weeks.
As Goyal referenced, sub-compact car, mid-size car, prestige luxury car and compact car segments declined the most by 0.68 percent, 0.53 percent, 0.50 percent and 0.48 percent, respectively.
Looking again at volume-weighted information, Black Book determined overall truck segment values — including pickup, SUVs and vans — dipped by 0.23 percent last week, similar to the average weekly decrease of 0.24 percent in values recorded during the previous four weeks.
Editors mentioned sub-compact luxury crossover and compact van were the worst performing truck segments, while pickup trucks values remained flat last week.
Turning next to what Black Book gathered from its representatives in the lanes, it seemed the talk at auctions revolved around dealer consignment.
The dialogue began out West with a lane watcher in Washington noting, “A new-car dealer says that they are keeping most of their trade-in inventory if the vehicles meet some minimal requirements.”
Sliding into the Midwest, a similar story appeared in Indiana as Black Book’s representative reported, “Consignment is still down here. with more buyers than sellers at the auction. The really nice, clean vehicles remain scarce.”
And the topic of dealer consignment percolated in Georgia, too, with the auction observer noting, “The trend of softer values is continuing here. No-sales were higher in the dealer-consigned lanes and the vehicles that did sell had low prices.”
The three other reports Black Book received from its staff in the field touched on a wide array of themes, and they came from various parts of the country, too.
From California: “The market appears to be cooling down. No-sales were more prominent today.”
From Pennsylvania: “A dealer said he is buying in the $8,000 to $15,000 price range with no real concern about the year model of the vehicles. Decent trucks are going to be much older at that price point.”
And out of Texas: “A wholesaler said that he is struggling to find 3- to 5-year-old units with low mileage.”
Analysts at J.D. Power Valuation Services found that May wholesale prices for used vehicles up to 8 years old declined by an average of 1.9 percent.
And their expectations predict a similar softening to happen in June, as well.
According to the June edition of Used Car and Light Truck Guidelines Industry Update, J.D. Power Valuation Services explained that the May price decline ended up being slightly better than the way the month has historically performed during the past 20 years.
“In spite of this glimmer of positivity, the 31-day period underperformed J.D. Power Valuation Services’ expectations for the month,” analysts said in the report. “It appears there has been no payback for February’s abnormally weak performance.”
Should analysts’ June forecast hold true, the report indicated that only a 1.9 percent price softening would be an improvement compared to June of last year.
“At the segment level, mainstream losses are expected to be fairly consistent with the exception of midsize and large pickups, which continue to perform very strongly and are forecast to perform significantly better than the industry average,” the report said.
“Losses for all premium segment are forecast to fall around the industry average,” the report continued.
In terms of full-year expectations, J.D. Power Valuation Services — formerly NADA Used Car Guide — maintained that used-vehicle prices should fall by about 6 percent, which would be 2 percentage points more than the 4 percent drop recorded a year ago.
“Ongoing increase in supply, higher incentives and normalizing retail environment — including credit conditions — will ultimately dictate losses,” analysts said.
More details about May movements
In lieu of a mitigated February federal tax season bounce back, J.D. Power Valuation Services’ seasonally adjusted used vehicle price index managed to increase for the first time in a year, ticking up by 0.8 percent to 111.1.
The May index reading settled 7.6 percent below the year-ago measurement of 120.2.
At the segment level, analysts explained in the report that mainstream segment losses were led by what they deemed to be a “usual suspect,” midsize cars. Prices for these units decreased by 2.6 percent.
The report indicated prices were “weak” for all midsize models, but especially the Nissan Altima, which sustained a 4-percent price decline.
“Additionally, late model year Altima volume accounted for 20 percent of all midsize car volume over the past few months, which has helped keep prices for the group depressed,” analysts said.
Like their sedan counterparts, the report mentioned that midsize van values also softened as prices fell by 2 percent. Analysts attributed that movement to a 70-percent increase in 2017 model year volume, which was traced back to an “elevated” number of Kia Sedona units returning to the marketplace.
Meanwhile on the opposite end of the spectrum, the report pointed out that midsize pickups continue to perform “exceptionally well” despite a 37-percent year-to-date increase in late-model volume.
On the luxury side of the market, J.D. Power Valuation Services mentioned that luxury midsize car prices dropped by 2.6 percent in May, following what the firm called a “strong April showing.”
Prices for luxury large utilities fell by 2.1 percent, which turned out to be the worst May for that segment since 2012, according to the report that also mentioned the decrease came in part because of a “sharp” 8 percent increase in month-over-month auction volume.
When asked about May's 1.9 percent price drop, David Paris, executive analyst at J.D. Power Valuation Services said in separate news release, “It’s normal to see a drop the fifth month of the year. However, this May was a little different since the decline slightly outperformed what we've seen during the month the past 20 years.”
Paris went on to say, “While the index may have increased by 0.8 percent during May, it was 7.6 percent below May of last year. That said, we expect wholesale prices of 8-year-old or younger vehicles to drop about 1.9 percent during June. We still expect prices to decline by about 6 percent for the year as a whole.”
