Used-car sales fell for the third straight month, but the mood among many dealers still seems to be a positive one, according to Tom Webb, who addressed the used retail market as part of his analysis surrounding the monthly Manheim Used Vehicle Index.
Webb, chief economist at Manheim, points to CNW Research data indicating that used retail unit sales dipped by more than 9 percent in August.
However, he tempers that news with this: “Nevertheless, we continue to hear positive comments from dealers that turn rates are good and net margins are strong.”
As a result of those healthy signs, dealers remain hungry — albeit “slightly more selective” — for used inventory that meets their needs, Webb said in the report.
“But, with new-vehicle sales so strong, keep in mind that for franchised dealers a lot of great inventory is literally being driven to their door every day in the form of trade-ins and lease turn-ins,” he added.
In fact, the 17.4 million new-vehicle SAAR last month was the strongest in eight years, Webb points out.
And the additional lease turn-ins that Webb mentions certainly have a far-reaching impact on the used-car market, as Edmunds.com demonstrates in its Q2 Used Vehicle Market Report.
“Big increases in lease returns typically apply downward pressure on prices but create opportunities to certify and sell more CPO vehicles. Lease returns generally meet manufacturer's eligibility requirements for certification because of low mileage, condition and age,” the Edmunds report noted. “CPO sales command higher prices and minimize impacts to transaction prices.”
(Case in point: franchised dealers had average used-car transaction prices of $16,781 during the second quarter, which is the highest amount Edmunds said it has ever recorded.)
Speaking of certified pre-owned sales, that’s another positive sign in the used-car market.
August was the best month in the history of the CPO market, as dealers sold 222,675 certified vehicles, according to Autodata Corp. This beat the previous record — which was set in May — by more than 15,000 units.
While the number of used cars sold in August fell from both July and year-ago levels, the total value of these cars did not, according to CNW Research.
In fact, there was a 7.3-percent year-over-year rise in the total value of used-car sales in August, the firm said, pinpointing the figure at nearly $41 billion.
CNW president Art Spinella pointed to “somewhat higher asking prices and the ability to get customers to pay closer to that asking price,” as the factor behind the spike, and the proof is in average transaction prices.
Those beat figures from last August by 14.6 percent, as they hit roughly $10,740 per car, CNW said.
If only there were more shoppers, though. There were 8.5 million people looking for a used car this August, down from 10.8 million shoppers in August 2013, according to CNW.
“The total number of used-car shoppers in August was off more than 20 percent, which explains the lower sales,” Spinella noted.
Specifically, there were
3.82 million used vehicles sold last month, which compares to 4.08 million used sales in August 2013. This latest monthly sales total is down significantly from the nearly 4.5 million used sales in July.
Interestingly enough, more people (5.1 percent more on a share basis, CNW says) stayed within their own marketing area to shop and buy.
This, despite the increasing use of the Web, which Spinella says “continues to be the growing source of motivation to shop for a used car.”
It’s not the 6.52-percent year-over-year decline in used-vehicle sales that concerns CNW Research president Art Spinella. The troubling part about used sales from August, he says, is the month-over-month decline of more than 15 percent.
That said, the start of September is showing some promise.
All told, there were 3.82 million used vehicles sold last month, which compares to 4.08 million used sales in August 2013, according to CNW. This latest monthly sales total is down significantly from the nearly 4.5 million used sales in July.
Spinella said in comments accompanying CNW’s used-car sales data that he was not surprised by the year-over-year drop, “as it is a regular August slip versus the previous year.”
But he added: “The month-over-month decline, however, is somewhat distressing because the usual pre-Labor Day sales tend to be for students returning to school and likely needing more reliable transportation.
“There was, however, a slight surge on the first of September used-floor-traffic, which may result in September numbers offsetting much of that decline.”
Year-to-date numbers (28.66 million used sales through August) are slightly behind year-ago figures. At this point of 2013, there had been 28.81 million used sales.
Breaking down August figures, franchised dealers sold 1.46 million used vehicles, down from 1.55 million a year ago. Through eight months, they have sold 10.46 million used cars, compared to 10.60 million in the year-ago time frame.
Independent dealers sold 1.21 million used units in August, against 1.40 million in August 2013. Year-to-date sales are at 9.33 million, compared to 9.56 million through August of last year.
There were 1.15 million casual sales in August, versus 1.14 million a year earlier. There have been 8.86 million private-party sales so far this year, up from 8.65 million through August 2013.
Title washing — the process of altering vehicle documents to remove unsavory details about a vehicle’s past from its title — is an increasing threat to the integrity and safety of the used-car industry in the United States.
According to a report released this week from researchers at Carfax, an estimated 800,000 used cars in the U.S. may be plagued by this issue, unbeknownst to their owners.
So what exactly can be covered up by this “title washing” practice?
The answer is daunting: pretty much anything that would probably make the average buyer walk away from a deal. Salvages. Flood damage. Rolled-back and non-functioning odometers. Many of these vehicles are repaired outside of the states where they’re sold, putting potential buyers looking for a deal at risk of financial and bodily harm.
The company claims the states hardest hit are New Jersey, North Carolina, Mississippi, California and Georgia — but that thousands of title washed vehicles could be in every state. More than 500 could be used as taxis.
Larry Gamache, Carfax’s communications director, believes looking into a vehicle’s history is one of the most key safety measures anyone looking to buy can make.
“Our research is clear evidence that title washing continues to fly under the consumer’s radar,” Gamache said. “These cars are sold mainly by perfect strangers who bank on you not taking the proper steps to protect yourself.”
On the dealer side, the responsibility is two-fold. Not only is it a good idea to find ways, such as providing a vehicle-history report, to assure wary used-vehicle buyers and maintain your reputation and integrity to your customer base, but it’s also the best way to protect your investments. Preventing title washed vehicles from being traded in or from going to auction is one key to saving money for everyone involved and potentially protecting the lives of those that drive your business.
For more information on Carfax and its services, visit their site here.
Weakening sales this month have triggered increased lot inventory, according to CNW Research’s monthly Retail Automotive Summary.
Despite dealers being able to get a higher-than-average percentage of their asking prices on used cars so far this month, the higher stocks of vehicles have led to the used-car days’ supply going up 3 percent, a trend the report says foreshadows a decrease in month-over-month retail prices.
Franchised and independent dealers are both experiencing increases asking prices, according to Art Spinella, CNW Research’s president.
“Franchised dealers received 96.9 percent of asking price compared to 95.4 percent a year ago,” Spinella said in the report. “Independent dealers were up nearly 2 percentage points from 94.7 percent to 96.6 percent.”
Spinella also pointed out that, although the private party market is experiencing a 7.7-percent increase in sales this month, dealer sales are down.
Specifically, franchised dealers are projected to sell 1.47 million used vehicles, a 5.1-percent year-over-year decrease. Independents are forecasted to move 1.26 million vehicles, a 9.5-percent decrease from August 2013.
CNW predicts 1.23 million casual sales, a 7.7-percent hike.
All told, there will likely be 3.96 million used cars sold in August, down 3-percent from the year-ago sum.
The expected year-to-date sum is 28.80 million, essentially static from the eight-month sum in 2013.
Urban Science’s 2014 mid-year Automotive Franchise Activity Report was released Thursday, revealing expectations of an all-time record-setting year for dealers by the end of 2014.
The report, which estimates that the average number of sales per dealership, based on LMC Automotive’s forecast of 16.2 million vehicles sold by the end of the year, foreshadows a throughput of 904 units. Achieving such a record would be a third-straight year of setting a national throughput record, shattering last year’s record by more than 30 units per store.
John Frith, Urban Science’s vice president, urges dealers to exercise caution when contemplating a potential expansion with the current flow of sales, with an inevitable ebb to come.
“Manufacturers and dealers continue to strike the delicate balance between meeting market demands and achieving profitability levels that have allowed the industry to rebound and thrive,” Frith said. “We know that automobile sales patterns are cyclical; it’s vital to remember current sales levels are near the peak of this cycle and will drop before growing again.
“Planning for the downturn will help dealers avoid financial problems in the future,” Frith continued. “As dealerships approach throughput of 1,000 units in the short term, manufacturers may be tempted to add rooftops to alleviate some of the pressure.”
The report reflects, as of July, a 0.4-percent increase in the number of dealerships in the U.S. since the end of 2013, migrating from 17,838 to 17,903. The first half of this year also brought about a 0.2 percent increase in the number of franchises, jumping from 31,440 to 31,489.
For more information about Urban Science, visit their site here.
Cross-Sell Reports — a division of Dominion Dealer Solutions — has a new offering for Georgia dealers.
Cross-Sell Reports has partnered with the Georgia Automotive Dealers Association to provide localized market data through the company’s market-reports tool: Cross-Sell Interactive.
Shane Marcum, general product manager for Cross-Sell Reports, noted, “Cross-Sell Interactive provides Georgia’s automobile dealers with the tools and information to strategically attack their primary market areas.”
This marks Cross-Sell’s first step in providing market analysis, statewide dealer and leinholder summaries, and MarketingINTEL reporting solutions to Georgia automotive dealers, the company explained.
Georgia dealers will now be privy to the customizable charts and graphs that allow users to create personalized dashboards with metrics and areas of interest through Cross-Sell Interactive.
Dealers located in local markets like Albany, Atlanta, Augusta, Columbus, Macon and Savannah can now access charting and graphing of market-based vehicle sales data.
Users can also use the Cross-Sell tool to track competition’s sales within a specific market area.
Marcum said, “Essentially, Cross-Sell Interactive removes the guesswork for the dealer by supplying an abundance of vehicle and location-based market data specifically tailored to where cars actually sell. This directly leads to increased ROI for automotive dealerships in Georgia and enhances their ability to tangibly measure where their advertising and inventory dollars are best positioned.”
Auto Remarketing recently used Cross-Sell data to help compile its "Top 100 Used Car Dealers" issues.
If interested in dealer rankings by state and more, based on 2013 used-car retail sales, see the following Auto Remarketing issues:
Top 100 Used Car Dealers: Franchised edition
Top 100 Used Car Dealers: Independent edition
Used-car sales in July fell nearly 2 percent industry-wide and dipped more than 5 percent for franchised dealers, according to CNW Research. But dealers, particularly the franchised stores, should take heart.
Trade-ins on new-vehicle sales will likely “spike” in August, CNW says, meaning franchised dealers should see a “solid” month on the pre-owned side.
That would be on top of the industry-wide growth in late-model supply in July, spurred by rising off-lease and off-fleet volume, CNW indicated.
That may be an especially good sign for the certified pre-owned market that’s becoming increasingly important to franchised dealers.
In July, supply of 1-year-old used vehicles was up 1.4 percent, CNW said, while supply for 2-year-old cars climbed 10.8 percent and 3-year-old cars jumped 1.6 percent.
As far as used sales, there were just under 4.5 million pre-owned cars sold in July, compared to 4.58 million used sales in July 2013 and 4.51 million used sales in June of this year.
Franchised dealers’ used sales were down 5.2 percent year-over-year and up 1.4 percent month-over-month. Similarly, there was a 5.2-percent downturn in sales for independents, who increased their sales sequentially by roughly 1 percent.
Casual sales jumped 6.5 percent year-over-year and fell 3.8 percent month-over-month.
If you haven’t started actively considering how to attract more younger buyers, now might be the time to do so.
According to a new study from J.D. Power, Generation Y consumers now make up a larger percentage of U.S. new-vehicle retail sales than their older Generation X counterparts.
According to data collected by J.D. Power’s Power Information Network (PIN) that illustrates that assertion, Gen Y has accounted for 26 percent of new-vehicle retail sales so far this year, compared to Gen X’s 24 percent share.
The largest group of buyers remain the Baby Boomers, who accounted for 38 percent of new vehicles sold during the first half of the year.
In comparison, in 2013, Gen Y accounted for 23 percent of new vehicles sold, while Gen X bought 24 percent of new vehicles during the first half of the year.
“As Gen Y consumers enter new life stages, earn higher incomes and grow their families, their ability and desire to acquire new vehicles is increasing,” said Thomas King, vice president of PIN. “As new-vehicle demand among Gen Y consumers increases, it will be important for automakers to respond to the needs of these consumers, not only in terms of the vehicle design, but also the marketing, sales and service experience.”
And the gap between Gen Y and Gen X car sales will most likely continue to grow.
According to J.D. Power, Gen Y sales volume is expected to grow 17 percent this year when compared to 2013.
On the other hand, Gen X sales volumes are only expected to jump up by 6 percent during 2014.
J.D. Power's PIN data shows which cars Gen Y shoppers are favoring.
According to the data, these younger customers are gravitating toward smaller vehicles, with compact/small vehicle segments accounting for nearly half of all Gen Y purchases.
In fact, the compact car segment is the most popular segment for Gen Y, with 20 percent of all vehicles sold to this group coming from this segment.
Gen X tends to lean toward larger vehicles, as this age group slightly favors midsize vehicles.
For Gen X, compact SUV is the most popular segment, making up 15 percent of sales to this generation.
Editor’s Note: For more info on J.D. Power’s most recent analysis, stay tuned to Auto Remarketing Today.
In addition to announcing record profits on Wednesday, Penske Automotive Group said it increased its worldwide used-car sales by more than 10 percent in the second quarter, with its year-to-date sum now ahead by more than 12 percent over year-ago figures.
Penske sold 45,912 used retail units worldwide in Q2, a 10.4-percent increase in global used sales. Same-store used retail sales were up 6.2 percent at 44,121 units.
Through the first half of the year, Penske has sold 91,282 used retail units (up 12.6 percent) and its same-store tally came in at 87,744 (up 9.1 percent).
Gross profit per used vehicle retailed in Q2 was at $1,966, a 2.6-percent increase. Through six months, gross profits per used vehicle retailed is at $1,942, a 0.3-percent hike.
“Our business delivered another outstanding quarter, achieving over 20 percent growth in revenues, income from continuing operations and related earnings per share,” said company chairman Roger Penske. “I am particularly pleased with another quarter of double-digit, same-store retail revenue growth, further highlighting the benefit of our company’s brand mix and geographic diversification. We remain confident in the strength of the auto retail market and our ability to continue growing the overall business.”
