While the acceleration of wholesale prices moving higher dipped a bit, Black Book indicated dealerships with the most robust financial resources continue to have the best opportunity to secure used-vehicle inventory during the coronavirus pandemic.
Black Book specifically mentioned large operations such as CarMax and Carvana showing their “dominance in the lanes” as analysts released their latest COVID-19 Market Insights report earlier this week.
“The increase in pricing related to winning bids is forcing smaller buyers to step back from bidding for fear of getting stuck with high-priced inventory,” Black Book said in the report.
“The divide continues to grow between the smaller dealers and the larger outfits as the money required to purchase inventory increases and retail fails to increase at the same pace,” analysts continued. “The larger dealers are relying on financing and add-on services as a revenue stream to overcome the small retail margins, but this is hurting the smaller dealers that do not have these services to offer.”
No matter who is cutting the floorplan checks, the amount needed to get those vehicles is declining at least a little bit.
Based on its volume-weighted data, Black Book reported that overall car segment values increased 0.96% this past week, representing the smallest amount of upward movement in the past seven weeks when prices first started a rapid week-over-week run of increases.
Analysts pointed out the latest movement is in sharp contrast to the same week last year when overall car segments values decreased 0.27%.
When volume-weighting is applied, Black Book determined overall truck segment values (including pickups, SUVs and vans) increased by 1.04% last week, marking the first time during the rebounding of values that the increases in the truck space exceeded the car arena.
“Last week, the minivan and full-size van segments had small declines that were viewed as stability, but the stability didn’t last long with all segments once again increasing this past week,” analysts said. “However, it is notable that many were at a smaller pace than previous weeks.”
Turning back to the atmosphere in the lanes nowadays, Black Book mentioned another trend that might be making it more challenging for dealerships with less financial horsepower to secure inventory they want.
“The portion of the market that is showing some stabilization and a slight softening are the ‘edgier’ units — those with higher mileage and lower condition scores,” analysts said.
“At the onset of the pandemic, the lower price point of these vehicles made them desirable, but this is a portion of the market that is showing some stability now,” they continued.
“The demand has shifted now toward newer-model-year, lower-mileage, and clean condition units that provide a viable substitution for consumers that are in the market for a new vehicle,” Black Book went on to say.
Black Book wrapped up its latest observations with two other anecdotes.
“Last week values continued to rise, but we did experience a small increase in no-sales as sellers continue to raise their floors and buyers show some hesitancy around what the future holds for used cars,” analysts said.
“Auction volume is showing some regionality in trends with volume increasing, particularly of rental units, in portions of the country that have been harder hit by spikes in COVID-19 cases,” they continued.
“Additionally, in the past two weeks, we’ve seen pockets of damaged units being sold in various parts of the country with sellers taking advantage of the strong market for late-model vehicles,” Black Book concluded.
People are getting back to work, but not at the pace experts are projecting for the economy, tangible consumer metrics and other intangible household conditions to improve quicker.
Just a small fraction of expectations, private sector employment increased by just 167,000 jobs from June to July, according to the July ADP National Employment Report, which is produced by the ADP Research Institute in collaboration with Moody’s Analytics. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.
“The labor market recovery slowed in the month of July,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute.
“We have seen the slowdown impact businesses across all sizes and sectors,” Yildirmaz said in a news release that accompanied the report’s availability on Wednesday.
Comerica Bank chief economist Robert Dye added this perspective in an alert distributed later on Wednesday.
“The weaker-than-expected July data from ADP tempers expectations for the official payroll numbers for July to be released Friday morning,” Dye said. “Consensus expectations were at 1.5 million for July payroll gains. We will revise our expectations down to 500,000 with a very wide uncertainty band around that number.”
The soft employment readings arrived on the heels of confirmation about how much the U.S. GDP declined during the second quarter. Cox Automotive chief economist Jonathan Smoke recapped that information from federal officials in a blog post pushed online Monday.
“The economy shrank 33% in the second quarter as a result of the lockdowns and reduced spending and investment, especially in April. It was the worst quarterly decline in the history of the GDP data, which started after World War II,” Smoke wrote.
“As the months progressed through the quarter, spending has been recovering. It has been especially strong in durable goods like cars and furniture,” he continued. “Incomes have been boosted thus far by fiscal stimulus, but we’re already seeing the impact dissipate as incomes declined in June. The Q2 decline leaves real GDP down 9.5% for the year, which was a record decline.”
Meanwhile, federal lawmakers continue to negotiate terms of another stimulus package. Terms of the CARES Act expired at the end of July; most notably the additional $600 weekly unemployment insurance benefit from the federal government.
“In my view, the fundamental disagreement is the scope and depth of the problem and its solution. This is the greatest crisis America has faced in 75 years economically, in a hundred years health-wise. We believe it needs a big, bold solution,” Senate Minority Leader Chuck Schumer said on Tuesday.
“They are still wrapped in this idea that the government shouldn’t do much and leave it to the private sector. And it just doesn’t work. They’re also not unified. They admit that there are a large number of the Republicans in the Senate will not vote for anything. And we don’t exactly know where Donald Trump is. He says a different thing every day,” Schumer continued.
“But we’re still slogging through step by step by step, and we’re making progress. It’s not easy, but we’re going to keep at it until we get the kind of bill the American people demand and need, which is a bold, strong bill,” he went on to say.
Also on Tuesday, Senate Majority Leader Mitch McConnell revisited the flashpoint of unemployment benefits.
“Republicans want to keep providing some supplemental federal unemployment. We just don’t think it is remotely fair for the federal government to tax essential workers who’ve kept working every day so Uncle Sam can pay their neighbors a higher salary to stay home,” McConnell said.
“Outside of the Democratic Leader and the Speaker of the House, even Democrats concede it is a bit upside-down to pay people more not to work,” he added.
Potential job growth path
No matter what political persuasion, the Committee for Economic Development of The Conference Board (CED) is calling on policymakers and business leaders to immediately help those furloughed or unemployed workers train to prepare for the post-COVID-19 economy. The CED sees it as a top priority for recovery before turning to develop a comprehensive, collaborative, longer-term training strategy.
Even prior to the start of the pandemic, the group said skills disruption had challenged the U.S. workforce with emerging technologies, potentially changing which skills are in demand.
“The pandemic’s whirlwind destruction has accelerated the innovative use of technology in the workplace, while at the same time hurt less-educated workers the most,” CED president Lori Esposito Murray said in a news release that accompanied its overall report.
“These two trends threaten to deepen inequality and add to the urgency of the upskilling and training challenge. This challenge needs to be addressed immediately,” Esposito Murray continued.
In response to the immediate demands of the COVID-19 crisis, the CED recommends:
— Tuition support for workers without four-year degrees who are working reduced hours, are furloughed, or have been laid off, to pursue training at low-cost, broad-access institutions, for example, either by direct support to the recipient or to the institution or organization providing the training, similar to Pell Grants. Pell Grants themselves can be temporarily modified or modeled and adjusted for these purposes.
— Grants to strengthen instructional quality and capacity at community colleges that engage in private-sector partnerships.
— Incentivizing employers to upskill their employees through tax credits for additional employer-sponsored training of low- and middle-wage employees — especially workers on reduced hours or furlough — that would qualify the workers for higher-paying roles.
Post-COVID-19, the CED also recommended a comprehensive, collaborative, longer-term strategy to improve both public- private-supported large-scale training efforts. Officials said that strategy should include:
— Public-private collaboration to align new job skills with training programs to improve outcomes for workers and their future employers.
— An information ecosystem to help adults navigate training options.
— Support for the most effective training models to meet the needs of a wide range of workers.
Retirees trying to help
According to the Edward Jones and Age Wave study released on Tuesday, the pandemic is also leaving a significant impact on retirees, too.
The survey showed how much retirees want to help even if they might not be in the full-time workforce any longer.
Reflecting a great deal of generational generosity, Edward Jones reported 24 million Americans have provided financial support to adult children due to COVID-19, and an overwhelming 71% of retirees said they would offer financial support to their family even if it could jeopardize their own financial future.
Despite COVID-19’s negative impact on finances, the survey indicated 67% of Americans said the pandemic has brought their families closer together. The research also revealed that 20 million Americans stopped making retirement savings contributions during the COVID-19 pandemic and only a quarter of working Americans were on track with their retirement savings prior to the pandemic.
“We’ve certainly seen COVID-19’s disruptive force on finances with the pandemic influencing retirement timing and financial confidence,” said Ken Cella, Edward Jones Client Services Group Principal.
“However, this cloud has brought several silver linings in terms of family closeness and important discussions about planning earlier for retirement, saving more for emergencies and even talking through end-of-life plans and long-term care costs,” Cella continued in a news release.
More evidence of a shift in demand from new vehicles to used: average listing prices for used vehicles jumped more than $700 from June to July, a period in which they normally would see a depreciation-fueled decline, according to Edmunds.
Specifically, used vehicles had an average listing price of $21,558 last month, which was up $708 from June, Edmunds said, calling the price gain an “unprecedented historical shift” for pre-owned.
This price spike is driven by a big uptick in demand, as many new-car shoppers opt for used instead, says Edmunds senior manager of insights Ivan Drury.
“We’re seeing evidence of more typical new-car shoppers gravitating toward the used-car market than usual during the pandemic due to a combination of factors: Consumers are being more financially responsible, interest rates and CPO offers have been extremely favorable, and inventory has been severely limited on the new side,” Drury said in a news release. “Shoppers might be a bit surprised to find that prices are ratcheting up on used vehicles because of significantly increased demand.”
He later added: “It’s a seller’s market right now. Although used vehicles continue to offer significant discounts compared to new, used-car shoppers will find themselves in the unusual position where they might not have as much negotiation power because demand is so high and dealers will be less inclined to be flexible.
“If you’re in the market for a used car, what you see in terms of pricing is likely what you’re going to get, so do your research and be prepared to act quickly if you have your heart set on a vehicle,” Drury said.
By segment, the price gains are across the board. Comparing 2017 model-year vehicle prices in July to those from June, the largest increase among mainstream segment (in terms of dollar amount) was for the large truck segment, whose prices climbed $2,301 over the month.
Midsize trucks were next (up $1,812), followed by sports cars ($1,369).
On the luxury side, the luxury midsize car had the biggest price spike ($1,151), followed by luxury compact cars (up $993) and luxury subcompact SUVs (up $931).
Looking at some additional recent data, J.D. Power said in a report Wednesday that its used retail price index was at 105.1 for the week ending Sunday, which was up from 104.6 the week ending July 26, 103.8 the week ending July 19 and 103.2 the week ending July 12.
“Used retail prices continued to rise, increasing 0.4ppts week-over-week in the week ending August 2. Prices are now 5.1% higher than the index baseline level from March 1,” J.D. Power said in its report.
On the wholesale side, there was a 26% increase in used-vehicle prices from April to June, following a 17.6% decline in April as the pandemic gripped the market, according to Moody’s Analytics’ quarterly Wholesale Used-Vehicle Price Report, authored by associate director and senior economist Michael Brisson.
“To put that in perspective, used-vehicle prices rose only 20% from January 2011 to the end of 2019,” Brisson said in the report, referring to the 26% spike between April and June.
“Prices soared from April to June because not enough vehicles were available. Supply of new vehicles was impacted as safety concerns from the pandemic caused all auto manufacturers in the U.S. to halt operations by the end of March,” he said. “This led to vehicle production shutting down despite demand for vehicles remaining solid.”
Looking forward, Moody’s was projecting prices in the third quarter will still be high thanks to supply and demand dynamics, but there likely won’t be a repeat of June’s bounce.
“The perfect storm of decreased supply and demand that arose in June is not sustainable. Additionally, the shoots of recovery may be stomped out as a majority of states, including the economic powerhouses of California, Texas and Florida, have been forced to put reopening plans on hold because of virus reintensification,” Brisson wrote.
“More important to prices, though, will be consumer sentiment. If COVID-19 outbreaks and subsequent shutdowns continue, consumer confidence will wane, driving down personal consumption. Without consumers buying things, businesses will not hire and the labor market will not be able to recover in full for a long time. Unfortunately, this fear and pullback cycle is the most likely scenario for the U.S. until a vaccine or treatment becomes viable.”
Moody’s is expecting an easing in prices thanks to more supply becoming available, be it from de-fleeted rental volume, restart of repossessions or off-lease cars finally coming out of extended leases.
“Sellers looking to take advantage of the used-vehicle price bubble will bring more vehicles to auction, driving prices down. Additionally, there will be pressure on the demand side as the unemployment rate stays persistently high. The baseline forecast is for an economy that is treading water rather than sinking through the rest of the year,” Brisson said.
“The current most likely path is that the double-dip recession will be staved off by another round of federal stimulus measures, and the virus spread will not lead to widespread economic shutdowns. Under this baseline scenario, a steady decrease in wholesale used-vehicle prices is expected to last until 2021.”
Getting into some of the specific data, average sale price at auction in the second quarter was $11,346, according to the report, citing NADA and Moody’s Analytics data.
That beat year-ago figures by 1.86% and was up from $10,834 in the first quarter.
Wholesale auction sales volume for the quarter was 1.16 million units, down 43.18% year-over-year, according to Moody's. In Q1, it was at 1.77 million.
These days, used cars take more than 37% longer to sell than they did in the four months leading up to COVID-19 pandemic, but some models — including three from Tesla — are bucking that trend, according to research from iSeeCars.
For this study, the company analyzed more than 9 million new- and used-car transactions from November through June.
From November through February, it took used cars an average of 50.1 days to sell. From March through June, average days-to-sell for used jumped to 68.9, iSeeCars found.
But not all models are showing such slow turn rates during COVID-19.
For example, the pre-owned Tesla Model 3 now takes an average of 29.3 days to sell, by far the quickest turning model on the used-car side, according to iSeeCars.
The Model S (No. 10 with 50.7 days to sell) and the Model X (No. 6 at 47.6 days) from Tesla were also among the 10 fastest-selling used models.
“The Tesla Model 3 began making deliveries in 2018, and because it’s so new to the marketplace, there is a low inventory of used versions,” iSeeCars chief executive Phong Ly said in the analysis.
“The Tesla Model 3, which was the automaker’s least expensive vehicle, had the highest number of preorders of any car ever produced, and the long wait time helped further drive the high demand for the vehicle, which has been sustained in the secondary marketplace.”
The company pointed to low used-car supply for the Model X (whose deliveries began less than five years ago) and “competitive pricing” for the Model S.
Going back to the top of the fast-sellers list, the BMW X6 was the second-quickest to sell at 43.0 days on average, followed by the Subaru BRZ (44.5 days), Toyota Yaris (44.8) and Honda Civic (47.4), respectively.
Spots Nos. 5-10 on the fastest-selling used cars list were the Model X (47.6), INFINITI Q60 (49.4), Honda Accord (50.0), Toyota Corolla Hatchback (50.2) and the Model S (50.7)
Auto Remarketing is collaborating with Podium to host a free webinar focused on one of the most important ways dealerships connect with their customers nowadays: digitally.
Podium marketing specialist Hayley Sonntag plans to share a quartet of takeaways for dealerships of all sizes during the session titled, “4 Ways Dealerships Can Attract and Service Customers, 100% Digitally.”
Sonntag intends to discuss:
1. Focusing on the online experience
2. Opening and communicating with customers in their preferred channels
3. Nurturing leads through messaging
4. Collecting payments via text
The webinar is set to begin at 2 p.m. ET on Tuesday.
“So much has changed in the world during the past few months,” Podium said. “There’s an increased urgency now to take every opportunity to increase online leads and interact with customers amidst all the uncertainty. This is requiring an unprecedented strategy and creativity.
“Join this webinar to learn how your dealership can manage your customer journeys — from initial search to final sale — digitally,” the firm added.
Dealers can complete registration for this free webinar on this website.
Dealership personnel is likely doing a lot of driving nowadays. Picking up and returning vehicles from appointments in the service drive. Or delivering vehicles to potential buyers for test drives and possible purchase.
All of these activities stem from the coronavirus pandemic and stores trying to cater to customers wary of going to the dealership.
Doppler recently launched a dealership workforce service to help stores that might be stretched thin because of these actions with parameters in place aimed at quelling manager apprehension, including:
— A national network of thoroughly vetted, fully trained staff
— All staff fully covered for workers compensation and benefits
— Doppler assumes all liability, including full Centers for Disease Control compliance
— Customizable services and pricing to accommodate individual market and dealer needs
— Doppler’s full-stack technology solution from customer reservations to dispatch and logistics making it totally turnkey
“The industry is rapidly rebuilding with new services. Dealers have an urgent need for professionally staffed, low-cost solutions like Doppler that can deliver a better customer experience,” said auto industry executive, retailer and AVC Capital Group board member James Press.
When done well, Doppler said these services can help deliver increased fixed operations business from higher repair grosses to better service retention as well as higher sales grosses and an overall superior customer experience.
Doppler managing director Dean Braunstein said the company can provide an “unparalleled solution” because of its previous experience of bringing these service to automakers.
In a news release, Braunstein added, “Doppler for OEMs has been an enormous success. We have used all the experience gained to adapt the platform and staffing specifically for the unique requirements of dealers and their customers.”
For more details, go to www.dopplerdrives.com.
Lower new-car inventory levels may have some consumers turning to the used-car market.
That bears out in a couple of analyses released in recent weeks.
According to Dealer Inspire internal data shared by parent company Cars.com, the used-car search share climbed 4.5 percentage points from March 23 to June 23, while new-car search share was down 3 percentage points.
That reversed what had happened at the outset of the pandemic, when new-car searches had a large lead over used-car searches, due mostly to record-high incentive levels, Cars.com said in an analysis released late last month.
New-car inventory levels declined due to the combination of such incentives and production stoppages.
“Until production fully rebounds and automakers can deliver a larger inventory of new cars, expect more shoppers to turn to used cars to fill the demand,” Cars.com said in a news release detailing research that identifies six trends the company expects for the second half.
“In turn, dealers can expect more opportunities to acquire used inventory outside of the traditional auction lane to beef up supply,” it added. “Shoppers should also anticipate potential price increases on used vehicles as demand increases and inventory shrinks.”
In a related analysis released Monday, Cox Automotive found that new vehicles priced below $20,000 currently have the highest inventory levels (95.6 days supply last week), with the $20,000-30,000 new vehicles next in line at 76.1 days.
Meantime, supply is lowest for the $30,000-40,000 new vehicle at 54.9 days.
New cars in the next four increasing price ranges all had days supply between 61 and 66 days, according to Cox Automotive/vAuto data.
The average for all new vehicles is 67.7 days.
“Since vehicle sales hit rock bottom in April, the below-$30,000 segment has been slowest to recover,” Cox Automotive senior economist Charlie Chesbrough said in the analysis. “It may seem counter intuitive that the cheapest vehicles would not be more in demand, given buyers generally seek lower prices during recessions. But those buyers likely are bearing the brunt of the downturn and may be turning away from new vehicles to used.”
With strong value and selection in pre-owned cars, “Demand for used vehicles has been running stronger than new-vehicle demand,” Chesbrough said.
Looking at data from J.D Power, there has been some moderation in growth when comparing used-car retail sales by franchised dealers to their pre-virus projections.
For the week ending July 26, used sales by franchised dealers were down 3% from pre-virus forecasts, after remaining above the projections for June and much of July.
For the week ending July 5, used sales at franchised stores were 22% stronger than pre-pandemic forecasts, but that gap narrowed to 10% the week ending July 12 and 4% the following week.
In its weekly analysis, J.D. Power said of the week ending July 26: “The result reflected a continuation of the slow down observed over the past three weeks. Used retail prices rose once again, increasing 0.7ppts week-over-week in the week ending July 26. Prices are now 4.5% higher than pre-virus levels.”
Records continue to tumble in the wholesale market.
Black Book reported on Monday that the month-over-month increase of its Used Vehicle Retention Index established another record as the July reading came in at 126.0, representing a 10.9-point lift from the June level of 115.1.
“July’s growth in the Retention Index broke the month-over-month increase record set just a month earlier,” said Alex Yurchenko, senior vice president of data science at Black Book. “Wholesale prices showed tremendous strength for the second month in a row due to shortages of used and new inventory, together with a strong demand fueled by the first round of federal stimulus payments.”
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 a percent of original typically equipped MSRP. It is weighted based on registration volume and adjusted for seasonality, vehicle age, mileage and condition.
The index dates to January 2005 when Black Book published a benchmark index value of 100.0 for the market. During 2008, the index dropped by 14.1% while during 2016, the index fell by just 6.4%.
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.
While this year’s event didn’t feature Weezer, Michael McDonald or John Fogerty, DAA Northwest still successfully orchestrated its summertime promotion — the Rock & Roll Sale — albeit in an all-digital fashion.
The event took place on July 22 and July 23 with the traditional series of segments, including a national accounts sale and an evening concert one day, then a dealer sale the next morning. The difference this year was digital as the sales took place exclusively via Edge Simulcast without vehicles or dealers in the lanes, and the concert was online.
McConkey Auction Group chief executive officer and president Bob McConkey described how the event was completely virtual in every respect.
“It was awesome in its own way,” McConkey said in a news release, mentioning that nearly 2,000 of the 2,400 units consigned were sold for an 83% conversion rate.
“While the volumes were obviously way off (a sign of the times) the sales percentage was off the charts,” he added.
The 1,100-unit Rock & Roll Sale offering included a Closed Ford Factory Sale along with open sale vehicles from Ford Motor Credit, Kia Motors America, Thrifty, Hyundai Motor Finance, Kia Motors Finance, Avis Budget Group, Honda Remarketing and Acura Remarketing.
One of DAA Northwest’s core values is “Fun,” and it was evident during the YouTube premier of The Cronkites’ rooftop concert.
The Cronkites have opened for every Rock & Roll Sale headliner since 1999, and they played on the auction’s roof for this year’s virtual party.
The auction pointed out the current pandemic didn’t allow for an in-person celebration, so DAA Northwest’s team delivered it digitally. The auction said concert guests attended online, dancing in their living rooms and engaging in a live chat throughout the 45-minute concert premier.
“Even though it was a great sale, I look forward to getting us all back together next summer for a ‘real,’ old fashion Rock & Roll Sale,” McConkey said.
Together with DAA Seattle, MAG Now, MAG Motorsports and MAG RV Sales, DAA Northwest is an independent wholesale auction owned by McConkey Auction Group (MAG). The company partners with leading auto auction technology providers Auction Edge and EBlock.
MAG also is a member of the National Auto Auction Association and ServNet.
Within days of announcing plans to change leadership at the top of the company, Cox Automotive also is making significant adjustments to other parts of its North American workforce.
According to an update from a Cox Automotive spokesperson sent on Auto Remarketing on Thursday, the company eliminated approximately 1,600 positions across the United States and Canada. The update indicated the figure represents a mix of corporate and field positions.
In the United States, Cox Automotive said approximately 1,500 positions were impacted with roughly 1,100 posts representing Manheim. Of this Manheim total, the company noted that 45% included part-time workers.
Of these Cox Automotive positions, 87% were furloughed in May, according to the company.
In Canada, Cox Automotive said nearly 130 positions were impacted, all of which were previous temporary layoffs.
“As Cox Automotive continues to evolve its business priorities and organizational structure in response to COVID-19, we’ve made the difficult decision to eliminate 1,600 North American positions,” the company said.
“While we regret the impact these moves have on our employees and their families, we’re working to create a Cox Automotive that’s prepared to meet changing client needs and lead the industry well into the future,” the company went on to say.
This action arrived after Cox Automotive announced that Steve Rowley would replace Sandy Schwartz as president effective Monday. Schwartz is moving to a role as chief executive officer of the Cox Family Office.
