The International Automotive Remarketers Alliance is beginning a three-part informational webinar series on Friday titled, “IARA Road to Recovery 2020.”
The opening segment is scheduled to feature KAR Global chief economist Tom Kontos and Cox Automotive chief economist Jonathan Smoke, who plan to discuss six topics, including:
• Status of the COVID-19 pandemic and the impact to the US economy
• Latest retail used vehicle sales and price trends and what they reveal about the recovery
• Regional differences in how local markets are recovering
• Wholesale used vehicle price, volume and conversion rate trends pre- and post-COVID crisis onset
• A high-level look at possible wholesale supply patterns for off-rental, off-lease, off-fleet, repo and dealer consigned units
• Expectations on duration and intensity of impacts to wholesale market from COVID-19
The series is set to continue on May 22 as a collection of dealer groups plan to discuss current actions and expected buying patterns. IARA indicated attendees also can gain insights about:
• How dealers have adjusted to the effects of COVID-19 and what this means for consignors in the remarketing space
• Where are dealer groups sourcing cars?
• How are dealer groups sourcing cars?
The series culminates on June 5 as IARA considers how the industry is “adjusting to the new normal.”
Consignors from OEMs, captives, banks, commercial fleets and rental car companies are scheduled to discuss the current remarketing landscape as well as:
• Find ways to maximize return on your inventories despite market changes.
• Discover how your remarketing strategy compares, competes or enhances current market dynamics.
Attendees can register for the opening webinar set for noon ET on Friday by going to this website.
Wholesale auction sales for the week ending April 26 marked the third consecutive sequential gain, according to J.D. Power Valuation Services, which also said sales for that period were over twice as strong as the tally from the market’s worst week.
The firm said in its COVID-19 Valuation Services Update released Thursday that there were 39,700 auction sales the week ending April 26, up from 34,400 the prior week and 23,500 from the week of April 12.
Most notably, it is a considerable improvement from the week ending April 5, when the market reached a low point of just 18,000 auction units sold, according to J.D. Power.
Additionally, the 39,700 auction sales the week ending April 26 were 40% of what was forecasted before the virus, J.D. Power said. At the worst point of the pandemic thus far, the ratio was 20%, the company said.
(The firm notes that the figures are for units up to 8 years in age. It also indicates that “Lagging reported sales can change previously reported figures.”)
In a webinar on Wednesday, Jonathan Banks, who is vice president of vehicle valuations & analytics at J.D. Power Valuation Services, discussed the auction sales improvement.
“A lot of this had to do not with the auction channels opening up, but actually from more conversions for dealers participating in the auctions,” Banks said. “What we’ve seen here is participation rates have increased, resulting in better conversion rates. So, more vehicles being sold in the auctions.”
Discussing the same data in an interview Monday, National Auto Auction Association chief executive officer Frank Hackett was optimistic about continued gains in auction sales.
“I think as things start to open up, we’re going to see this continuing to tick up,” Hackett said. “And whatever we’ve lost, I think that pent-up demand is going to be there and we’re going to make up for it later on when things start kicking in gear.”
Likewise, the analysts at Black Book pointed out similar gains in auction volume in a report released Thursday that shows gradual improvement in year-over-year comparisons.
“The number of sales dropped dramatically (up to 80%) when most auctions closed their physical sales (and some closed entirely),” Black Book said in the report. “After the volume bottomed out at the beginning of April, we are starting to see a rebound.”
The estimated year-over-year sales volume declines have improved from the 80% range in early April to the 40-60% range by late April, the Black Book data shows.
While no-sale rates remain high, several auctions were seeing sales rates increasing the week of April 20-26, thanks to easing or ending stay-at-home orders in some states, Black Book said.
After reaching a low of 15% the week of March 30, the estimated average weekly sales rates at auctions has risen each week since, reaching 35% the week of April 20-26.
“Bidding activity accelerated this past week, and notable additions to the bidder lists were some of the larger players in the market, including CarMax and Carvana, who have both been relatively subdued since the beginning of the pandemic,” Black Book said in Thursday’s analysis. “This was viewed as a positive update for auction activity and to many in the industry.”
In its data, J.D. Power indicates that there had been 207,000 wholesale sales since mid-March. That’s off 480,000 units from the year-ago period and 430,000 units softer that what was forecasted before the pandemic.
But look for things to continue getting better
“We expect to see the auction results increase pretty dramatically over the next few months,” Banks said.
Wholesale-price analysis and projections from Black Book, Cox Automotive and J.D. Power Valuation Services contained a variety of encouraging assessments about the trajectory of this vehicle metric.
Beginning with the latest update from J.D. Power Valuation Services, analysts there said wholesale auction prices ticked up by a little more than 1% on a weekly comparison for the week ending April 26. Analysts indicated the positive move represented the first one they’ve seen since the middle of March.
Because of the pandemic, the latest wholesale-price reading landed 14% below J.D. Power Valuation Services’ pre-virus forecast for the week.
“While the small improvement can be viewed as a positive indicator of a strengthening market, results still represent a significant discount versus pre-virus levels,” J.D. Power Valuation Services said in the report containing its latest price update.
After several weeks of softness, J.D. Power Valuation Services found that mainstream passenger car prices improved during the reporting period by an average of 2%.
“While mainstream passenger cars experienced small gains, segment prices remain some of the most depressed when comparing the week ending April 26 to pre-virus expectations,” analysts said.
“With that said, mainstream small, compact, and midsize car prices are down by roughly 17%, while SUVs and compact and full-size pickup prices — while still down — performed much better at down by 9% and 14%, respectively,” analysts went on to say.
Over at Cox Automotive, chief economist Jonathan Smoke said in a video presentation that his team’s data shows “wholesale used-vehicle values are starting to stabilize.”
Smoke pointed out the 3-year-old MMR Index declined 2% for the week ending April 25 and is now down 10.2% over the past five weeks. But he also mentioned the MMR Retention Gap narrowed to 2.7%. Cox Automotive calls MMR Retention as average auction transaction prices compared to MMR values
“We have been advising clients to adjust MMR by the retention rate to get an estimate of what it takes to sell in today’s marketplace. Given the improvement in the retention rate, that may be no longer necessary soon,” Smoke said.
Short-term and long-term forecasts
Black Book’s analyst team tackled the challenge of updating short-term and long-term wholesale-price forecasts.
Contained in its update shared last Thursday, Black Book first discussed its forecast based on its most likely economic scenario.
Analysts anticipate an average drop in wholesale prices of 17% during the remaining months of 2020 compared to pre-COVID-19 projections with larger drop occurring during the summer with some recovery in the fall.
To be more specific, Black Book’s short-term price outlook included an 18% drop for SUVs and light trucks and a 15% decline for cars.
Looking ahead to the summer and fall of 2023 with that most likely economic scenario in mind, Black Book said, “The effects of the pandemic will continue to be felt, but we project that values will return to the pre-COVID-19 baseline as used supply will decline because of cuts in retail and fleet sales in 2020 and 2021.”
Turning to its severe recession scenario, Black Book’s wholesale-price forecast is more negative.
Analysts see the potential for a 25% tumble in wholesale prices compared to a pre-COVID-19 baseline this summer and fall with a “very slow” beginning to recovery in 2021.
Specifically, that severe recession scenario has a 26% price plummet for SUVs and light trucks and a 22% price drop for cars.
Black Book closed with its longer-term projections for 36-month residual values under the severe scenario, saying, “The effects of the pandemic and recession will still be felt, and we project a 10% market level decline of wholesale prices as compared to pre-COVID-19 projections.”
NextGear Capital Scott Maybee joins the Auto Remarketing Podcast to discuss how the company is helping dealers during COVID-19, a resource hub and more.
The company had announced in late April that it would continuie to defer curtailment and extension payments for eligible floorplan advances.
The company is taking that action through May 31 for all NextGear Capital dealers in good standing.
Within the first 30 days of NextGear Capital’s original relief package, the company deferred more than 160,000 payments.
That, according to NextGear, provided assistance to more than 16,000 dealers “when it was needed most.”
“After discussions with our dealers, we decided to continue the relief terms that were the most important, beneficial and meaningful to them and their businesses,” Maybee said in a news release.
Maybee continued, “Our hope is that, between the relief package, our incredible staff and the resources we’ve put together online, we can help our dealers make it out on the other side of this unprecedented economic crisis. Sticking together is the only way our industry will get through this still intact, and we want all of our dealers to know we are here to support them however we can.”
To listen to this episode, click on the link available below, or visit the Auto Remarketing Podcast page.
Download and subscribe to the Auto Remarketing Podcast on iTunes or on Google Play.
Madison Gross, who is director of customer insights at CarGurus, describes a recent purchase of a puzzle.
The sales associate texted her photos of the puzzles that were in stock. Gross paid for the puzzle over the phone, and the sales associate left the puzzle in a bag for her outside the store.
Many of us have had experiences similar to Gross’ in recent weeks, whether we’re buying coffee, groceries or household goods.
More and more of that is trickling into automotive, as well.
“In some cases, we’re buying things in ways we never really expected to right now,” Gross said in a phone interview Thursday. “And so that is causing us to be willing to buy other things or bigger things in ways that we never expected to.”
Bigger things like cars.
According to research from CarGurus, roughly a third of car buyers (32%) were open to purchasing vehicles online before the pandemic. That has since jumped to 61%.
About a fifth (19%) of car buyers preferred the online route to purchase a car before the pandemic. That has since jumped to 39%.
“Both the portion of shoppers who were open to and the portion of shoppers who prefer purchasing online has roughly doubled since before the pandemic. And we expected to see some increase, but we were surprised by the magnitude of the increase,” Gross said.
“If I had to guess, I would say that when things return to normal, we may see some moderation of those increases, but that they would still be significantly higher than they were before the pandemic,” she said.
And the appetite or willingness to buy online appears to now be relatively even between new and used, Gross said.
“Interestingly, what we saw is, before the pandemic, new intenders had higher openness to purchase online. But since then, used intenders are more likely to have switched from 'I wasn't open' to 'Now I am open,’” she said. “So, at this point, total openness between new and used is pretty similar.”
And while openness and appetite have increased, certainly many dealers had digital retailing capabilities before the pandemic. However, such capability “wasn’t being promoted en masse like it is right now,” says Michelle Denogean, who is chief marketing officer at Roadster, a company that offers dealers digital retailing services.
“Dealers have had to put the word out that (consumers) have the capability to buy online and that's fundamentally changing consumer awareness around these capabilities," Denogean said in an April interview. “I think the expectation is going to be that I can still do as much of this as I want from the comfort of home, even post-COVID-19, and be able to have an efficient experience.”
Efficient is a key word there, particularly as it relates to time. Roadster surveys many consumers after they purchase via Roadster-equipped platforms. The company will ask the shopper how long the transaction took.
“They’re experiencing 30- to 60-minute transactions now, and they're really liking it and they're telling us that,” said Roadster chief operating officer Rudy Thun, during the same interview.
“They're telling us that this process was amazing and that the salesperson that was helping me through the experience was amazing,” Thun said. “And so, it's really exceeding expectations for shoppers and I think once you've experienced, it's going to be hard to go back to spending four hours in a dealership. If you've gone through this experience this time, I think you're going to be changed forever going forward.”
Citing 2019 survey data from parent company Cox Automotive, Noah Lee of Dealer.com said consumers spent an average of 180 minutes in a dealership to complete a vehicle transaction. The “acceptable” amount of time, consumers said, was 90 minutes.
Before COVID-19, dealerships were “behind the curve” in this regard, Lee said.
"Now, they're forced to move into this new sales environment. And now that consumers are exposed to it, they're not going to want to go back,” said Lee, who is head of product consulting at Dealer.com
“My advice (for dealers) is to look at your sales processes, utilize these and set up your salespeople to kind of change their mindsets,” he said. “It is going to be a culture change.”
Going back to the CarGurus data, one caveat to bear in mind: a majority still want to make the purchase in person, though the preference for online has climbed substantially.
“When I look at our data, one thing I see is that there's still a difference between openness and preference. And the fact that still, more than half of shoppers prefer to purchase in person says to me that a lot of people right now value and miss the in-store experience that they can usually have when they're shopping for a car,” Gross said.
“So, in the meantime, dealers are offering a variety of contactless services to fill that gap,” she said. “And some of those services will continue, particularly I think we've gone past the point where we expect the virus to be like an off-switch and we're all back to normal.
"We'll be wearing masks and socially distancing for some time when we visit car dealerships. That will become a more normal part of the experience,” Gross said.
She said dealers are likely to continue offering contactless services like virtual video walkarounds and test drives without sales associates.
“I think some of those things are likely to stick around for a while,” Gross said.
Meantime, the dealers who had digital capabilities before the pandemic are faring better, says Lee of Dealer.com.
“The dealerships who chose to invest in a digital retailing solution prior to all this, we're finding are able to weather this storm in a better way. They're working through this more favorably,” he said. “They're able to work their deals remotely, they're seeing engagement with those digital retailing tools and they're able to continue to sell cars right now without having to bring that consumer into the dealership.”
Citing Cox data from before the pandemic, Lee noted that 85% of shoppers wanted to begin putting the transaction together remotely and have everything lined up before going to the store. And these days, spending three hours at a dealership is not an option, he said.
“The dealerships that have already taken those steps to take the in-person element out of the equation are faring better,” Lee said.
Cherokee Media Group president Bill Zadeits is back on the mic for this episode of the Auto Remarketing Podcast, where he chats with John Lilly, president of Integrated Auction Solutions.
Bill talks with John about the company's recent investment from Summerset Group, how IAS is helping its customers weather the pandemic's storm and more. Plus, John discusses his deep background in automotive technology.
To listen to this episode, click on the link available below, or visit the Auto Remarketing Podcast page.
Download and subscribe to the Auto Remarketing Podcast on iTunes or on Google Play.
Cherokee Media Group hosted an educational webinar with vAuto almost a year ago, highlighting best practices for how dealers can prudently secure inventory online.
The presenter for that webinar — vAuto director of used-car solutions Patrick Janes — recently joined Nick Zulovich for an episode of the Auto Remarketing Podcast to revisit some of those best practices that now are even more important during the coronavirus pandemic.
To listen to this episode, click on the link available below, or visit the Auto Remarketing Podcast page.
Download and subscribe to the Auto Remarketing Podcast on iTunes or on Google Play.
As if dealerships didn’t have enough to concern them nowadays because of the coronavirus pandemic, reports out of one of North Carolina’s largest cities indicated 11 dealers and a rental car facility have seen nearly 50 vehicles stolen in the past month; inventory worth more than $1 million.
The incidents reinforced the more than dozen security suggestions AutoRaptor made to help dealerships protect one of their most valuable assets.
According to a Facebook post from Crime Stoppers of Winston-Salem and Forsyth County, those 11 dealerships and rental location have sustained 18 break-ins since March 17.
The post indicated 46 vehicles were reported as stolen in Winston-Salem. Those vehicles were reportedly valued at approximately $1,138,718.00.
All but six of those vehicles have been recovered, according to Crime Stoppers of Winston-Salem and Forsyth County.
The Winston-Salem dealerships and rental location targeted in this crime spree include:
— Flow Honda
— Flow Lexus
— Parkway Ford
— Flow Audi
— Modern Infiniti
— Bob King Kia
— Modern Toyota
— Volvo Cars Winston-Salem
— Parkway Ford
— Flow Subaru
— Flow Chevrolet
— Enterprise Rent-A-Car
Crime Stoppers of Winston-Salem and Forsyth County said detectives have identified 19 juveniles known to be involved in these thefts with some of suspects being as young as 9.
“Detectives are continuing their efforts to investigate these crimes and to prevent future thefts. Authorities are working with local dealerships to better secure their facilities and to initiate steps to prevent thieves from obtaining vehicles keys,” Crime Stoppers of Winston-Salem and Forsyth County said.
Along with securing keys AutoRaptor — which recently selected by the National Independent Automobile Dealers Association NIADA as a bronze-level national corporate partner — offered 15 different security recommendations stores could implement. The suggestions ranged from improving lightning and cameras to periodically changing locks to even hiring security guards.
“If you’re worried about the possibility of a dealership security breach, then it’s time to think about making improvements before it’s too late,” AutoRaptor wrote in a blog post that contained all of the security recommendations. “What if the stolen car belonged to a customer in for a service appointment? Or if there was already an agreement on a unit, and it was stolen the night before it was supposed to be delivered? It’s critical to put safeguards in place to avoid situations that can ruin your dealership’s reputation.”
Meanwhile, authorities are asking anyone with information regarding the investigation in North Carolina to contact the Winston-Salem Police Department at (336) 773-7700 or Crime Stoppers at (336) 727-2800.
After two weeks of improving numbers, the decline in used-vehicle sales at franchised dealerships compared to pre-virus projections got a bit steeper last week, according to J.D. Power.
But in total, used-car retail numbers in total are getting better when compared to year-ago figures, according to Cox Automotive.
Here’s a look into those respective data sets.
In a webinar Wednesday afternoon, J.D. Power shared data indicating that franchised dealers saw a 45% decline in used retail sales (compared to pre-virus expectations) last week.
During the week ending April 19, the decline was 42%, improving on the 54% and 61% declines in the two preceding weeks, respectively. Jonathan Banks is vice president of vehicle valuations & analytics at J.D Power Valuation Services.
“What we saw for used is not as dramatic of a recovery as new," Banks said, noting the steeper decline than the week before. "So used retail demand at franchised dealers is lagging a bit behind new-vehicle sales.”
The decline in new-vehicle sales from pre-pandemic forecast was 39% last week, making it four straight weeks of improving numbers. For the week ending April 19, the new-car decline was 44%, following drop-offs of 50% (week of April 12), 55% (April 5) and 59% (March 29), according to J.D. Power.
Over at Cox Automotive, chief economist Jonathan Smoke released his weekly update video on Wednesday.
Smoke indicated that used-vehicle retail sales bottomed out at the beginning of April and have shown gains since then. Last week, used-vehicle sales were down 35% from prior-year figures.
(The Cox Automotive numbers include franchised and independent used-vehicle retail sales, but not private-party sales.)
“That’s a significant improvement,” Smoke said of last week’s numbers.
It’s still a big drop, but consider that April began with year-over-year declines above 60%, according to the Cox data.
Smoke wrapped up his video with this message: “In conclusion, the market remains down. But we’re definitely seeing improvement in both new- and used-vehicle sales. We’re not out of the woods yet with COVID-19, and the key concerns in the coming weeks are going to be following the income disruption and unemployment that’s left in the wake of the crisis.”
There are, quite literally, many moving pieces to J.D. Power Valuation Services’ used-car supply forecast.
But bottom line, don’t fear the “glut.”
Used supply will be likely be lower than pre-virus forecasts in May, higher than pre-virus forecasts in June, then back to pre-pandemic levels in August, the company projects.
Here’s how that shakes out, according to their COVID-19 Valuation Services Update released Friday.
March saw a deferral or removal of approximately 480,000 off-rental, off-lease and trade-in vehicles, compared to what was forecasted before the pandemic, according to J.D. Power Valuation Services (whose data includes vehicles up to 8 years in age).
That number for April is expected to be another 557,000 vehicles.
Granted, the deferred off-rental and off-lease units are likely to hit the market next month and in June, plus supply coming from cuts in rental fleets.
But trade-in volume is expected to see a massive drop through May, which will offset those aforementioned supply bumps.
“This will lead to a roughly 63,000-unit reduction in volume in May, compared with our pre-virus expectations,” said Jonathan Banks, vice president of vehicle valuations & analytics at J.D Power Valuation Services, in a news release.
It is likely that new- and used-vehicle retail sales, however, will get stronger in June, meaning more trade-ins added to the used supply mix.
“Supply expected in June will be 160,000 units above our pre-virus forecast,” Banks said. “By August, supply will likely settle around the pre-virus levels we were observing in February of this year.”
Some more specifics on that supply movement: Before the virus, the combined off-rental, off-lease and trade-in volume for March-June was forecasted at about 1.25 million per month. J.D. Power now projects that sum will be slightly over 1 million per month.
The J.D. Power report also delved into more specifics on the volume of rental deferral/reductions and lease volume by month.
In March, it was at 10,000, then grew to 200,000 for April and is likely to peak at 418,000 for May. Those numbers are expected to drop to 238,000 for June, then 22,000 for July and zero for August.
Some additional context: In an interview Monday, National Auto Auction Association chief executive officer Frank Hackett, citing Banks, said there were 800,000 overflow units on auto auction lots right now, in addition to the volume that is being sold. This illustrates the pent-up supply of cars that will need to be sold, he said.
