The 2014 model-year crop of vehicles still dominates the volume at auction, according to NADA Used Car Guide, but here’s the catch.
Volume for this class actually decreased month-over-month in April, and future declines could be in store, the latest Guidelines report indicated.
“If last year's auction results for the 2013 model-year are any indication, we should see volume for 2014 models decline a bit more and then flatten out over the next few months,” NADA Used Car Guide’s Jonathan Banks said in the report.
Specifically, there were 63,400 units of 2014 model-year vehicles, compared to 68,600 in March.
Overall, auction volume last month showed about 327,000 units of vehicles up to eight years in age, beating year-ago figures by 7 percent, despite falling 4 percent from March. Year-to-date, auction volume has increased 7 percent, NADA reported.
The only two model-year groups that increased volume from March were the 2013 group (sales up 5 percent at 55,300) and the 2015 class (sales up 20 percent at 11,900), according to Guidelines.
Barring a few exceptions, consumer interest has largely turned to sportier models as the weather continues to warm.
In fact, demand for these models, many of which have convertible options, prompted Autotrader senior analyst Michelle Krebs to say the following: “Spring has arrived, and car buyers’ desires have turned to sporty cars.”
The majority of cars in Autotrader’s March Scarcity report — which ranks vehicles in high demand but short supply — are sporty cars, both at the national level and in specific metro markets, the company shared with Auto Remarketing.
The certified pre-owned Porsche Cayman continues to be the most “elusive” certified vehicle in the country, according to the report.
And similar to recent months, the CPO Volkswagen Golf R (No. 3) and the CPO Porsche Boxter (No. 6) also made the top 10 list of hardest-to-find certified rides.
The CPO Golf R also ranked at No. 1 in Chicago and Dallas/Ft. Worth and at No. 2 in Los Angeles, Krebs pointed out.
The certified Corvette is also making waves.
“The CPO Corvette has cropped up in Autotrader’s scarcity report monthly since the newest version of the sports car hit the market,” Krebs said.
It currently ranks at No. 8 nationally and in several market areas, such at Atlanta (at No. 2), Chicago (No. 7), Dallas/Ft. Worth (No. 2), Houston (No. 1) and Washington, D.C. (No. 3).
Dealers also may have had trouble finding certified Audi models this past month.
“A variety of sport CPO Audi S models have been in high demand and short supply,” Krebs said.
- The CPO S4 ranked No. 6 in Atlanta, No. 4 in Boston, No. 6 in Los Angeles, No. 8 in New York, No. 3 in Philadelphia and No. 2 in Washington, D.C.
- The CPO Audi S5 was scarce in several DMAs, showing up at No. 6 in Atlanta, No. 5 in Chicago, No. 6 in Houston and No. 7 in the San Francisco area.
The late-model used scarcity list also touted many of the same models. On a national level, the VW Golf R topped the list, and the Subaru BRZ came in at No. 2.
The Audi allroad came in at No. 3, followed by the Chevrolet Colorado and Subaru WRX, respectively.
The Exceptions
Though sporty vehicles dominated March scarcity lists, Krebs did point out a few exceptions that might have had to do with winter hanging on a bit longer than usual this year.
“An exception to the sporty trend is the CPO Chevrolet Colorado, resurrected in redesigned form this year,” Krebs said.
“It shows up in a number of markets as being desired but hard to find,” she said, particularly in Houston (No. 4), New York (No. 9) and Philadelphia (No. 7).
“In response to high demand for the new version of this vehicle, General Motors is running its plant flat out to keep up with demand for the Colorado and its sibling, the GMC Canyon,” Krebs added.
And in Boston, following a winter with record snowfall, SUVs and vehicles that can better handle winter weather were in high demand.
“The extremely harsh winter was slow to leave Boston, and that shows in the list of vehicles in high demand in the snowy region. Half of the vehicles in the Scarcity report for Boston were SUVs with a couple of all-wheel-drive cars also making the list,” Krebs explained.
The No. 1 hardest-to-find CPO vehicle in Boston in March was the Toyota FJ Cruiser, followed by the Land Rover Range Rover Evoque. The CPO Toyota Sequoia also made the list, coming in at No. 6, followed by the Chevrolet Silverado and Toyota 4Runner, respectively.
Click below to see the full March Used and CPO Scarcity Reports from Autotrader:
As we draw closer to the summer months — prime time for a road trip with the top down — sports cars continue to be in high demand and low supply.
That’s according to Autotrader’s February installation of late-model used and CPO scarcity reports.
For example, the CPO Porsche Cayman was the No. 1 scarcest certified vehicle in the country in February, while for the late-model used market, the Nissan GT-R tops the list.
The BMW M3 (No. 5) and the Audi A8 (No. 6), also graced the list of scarcest certified vehicles nationally.
On the late-model used side, the Porsche Boxster came in at No. 5; the BMW 2 Series at No. 6; the BMW M3 at No. 8, and the Audi TT at No. 10.
In terms of why sports cars remain scarce, Michelle Krebs, senior analyst at AutoTrader.com said we have to look a few years back.
“That’s due in part to the fact that sports car sales were the first to fall during the recession and the last to emerge. Little leasing was available to finance sporty cars, so the used pool was small,” Krebs explained.
That said, as the economy continues to recover, buyers began to return to the sports car market — but supply isn’t up to meeting such demand.
“As the economy began to recover and buyers had more discretionary income for purely fun purchases, sports car sales — new and used — began to rise,” said Krebs. “Demand for used ones grew, but with little supply to quench the appetite for those buyers.”
The CPO Porsche Cayman was also scarce in specific designated market areas, such as Los Angeles and New York, where it remains the hardest-to-find certified vehicle.
The certified unit also came in at No. 2 in Atlanta, and the CPO Porsche Boxster is at No. 4.
“With the economy continuing to improve and spring arriving after a particularly brutal winter, scarcity of used sporty cars will likely continue through the summer months, as it did last year,” Krebs concluded.
See below for the full listing of February’s scarcest vehicles from AutoTrader.com:
Even though last year marked one of the ugliest recalls for General Motors — as well as one of the biggest ever for the industry — demand for GM vehicles remains strong as supply dwindles.
According to the February installation of AutoTrader.com’s scarcity reports provided to Auto Remarketing, even though GM recalled 5.88 million vehicles for faulty ignition switches last year, it seems GM buyers have “shrugged off the bad news.”
Michelle Krebs, senior analyst at AutoTrader, pointed out that just last year, consumers bought 5 percent more new GM vehicles in 2014 than they did in 2013.
And the same trend is popping up in the used-car market, especially for CPO vehicles.
Krebs said a number of GM vehicles, primarily Chevrolet models, which were hit hardest by the ignition switch recalls, are in “high demand and low supply.”
Nationally, four Chevrolet models made the cut for the top 10 list of most scarce CPO vehicles.
On the certified side of the market, the Cadillac Escalade EXT sport utility came in as the No. 2 scarcest CPO vehicle in the country in February.
And the Chevrolet SS, a low-volume vehicle, according to Krebs, came in at No. 3 on the CPO national scarcity list.
The CPO Chevrolet Caprice, a model which is no longer manufactured, came in at No. 7; and CPO Chevrolet Corvette rounded out the top 10.
Krebs pointed out the CPO Corvette “is perennially in high demand and low supply,” coming in as the No. 1 scarcest certified vehicle in Washington D.C.; No. 2 in Houston; No. 4 in Los Angeles and Dallas-Fort Worth; and No. 8 in New York.
Highlighting the popular Chevrolet truck lineup, in particular, Krebs said these units are “in high demand and low supply.”
On the smaller end of the spectrum, the CPO Chevrolet Colorado is the scarcest certified vehicle in Boston and Philadelphia, and came in at No. 8 in Los Angeles.
“Southern California is the biggest market for small pickup trucks,” said Krebs. “The sibling CPO GMC Canyon is No. 1 in Atlanta for high demand/low supply.”
Some of Chevy’s larger trucks are gaining steam, as well, as the CPO Chevrolet Silverado ranked the No. 5 scarcest certified vehicle in Boston. And the CPO GMC Sierra versions were No. 5 in Atlanta and Dallas-Ft Worth.
Editor’s Note: Stay tuned to Wednesday’s Auto Remarketing Today for more insight into used vehicles in low supply and high demand.
In less than two years, the auto industry might look a lot like the business we knew before the Great Recession.
That’s according to executive analyst for NADA Used Car Guide Jonathan Banks, who predicts late-model used vehicle supply will reach pre-recession levels in 2017.
Banks reported this assertion on Monday, right in time for the NADA and J.D. Power Automotive Forum on Tuesday, hosted by the New York International Auto Show.
And of course, with the growth in supply, the industry also expects this trend will put downward pressure on used-vehicle prices in the coming years.
"The used car market has enjoyed high demand and short supply after the recession causing used car prices to reach all-time highs,” said Banks. “As the automotive market continues its rapid recovery, fundamentals in the automotive market will inevitably drive used car prices down. The question everybody's asking relates to how much prices will drop and when."
There are a variety of factors at work this year, putting opposite pressure on used prices.
NADA’s predictions take into account strong economic growth, new products, healthy employment gains, higher home prices and lower gasoline prices as factors that could potentially have a positive impact on used prices.
But on the other hand, these factors will be battling the negative impact on used prices of higher supply, increased new-market pressure, such as incentives, and tighter credit conditions.
"A burgeoning off-lease supply of used vehicles will drive late-model (5 years old or newer) volume up 8 percent this year. While late-model supply will reach pre-recession levels in 2017, overall supply won't reach this point until a few years later,” said Banks. “Off-lease supply will be dominated by compact cars and utilities, along with mid-size cars and utilities, which is a pre-recession trend reversal.”
Used-vehicle prices were down this past February, and the trend isn’t expected to stop anytime soon.
According to the latest RVI Risk Outlook report, greater incentive activity and a more competitive new-vehicle market — as well as increasing used supply — will combine to put even more downward pressure on pre-owned prices.
“The upturn in the U.S economy and the increase in new-vehicle sales are expected to contribute to an increase in the supply of used vehicles over the next few years. Competition among manufacturers and incentives activity is also expected to increase,” the report stated. “Due to these factors, used-vehicle prices in the U.S. are expected to fall 10 percent (relative to current levels) by 2018.”
The industry is expecting a surge of off-lease vehicles to hit the auctions this year, and it seems the trend will continue into coming years, as well, judging by 2014 statistics.
According to the report, 2014 was a strong year for leasing. In the fourth quarter, the lease penetration rate was 19.5 percent, and in 2014 as a whole, leasing accounted for 19.6 percent of U.S. new auto sales.
“We expect a higher lease penetration to continue for 2015 and 2016 model year vehicles,” RVI analysts predicted.
This past month, used-vehicle prices were already on the way down. According to the report, used prices, seasonally adjusted for vehicles 2 years to 5 years old, had fallen off 1.1 percent from January, according to RVI data.
Taking a look at recent residual movement by segment, full-size pickup prices were one of the best performing groups. This segment saw a slight decline of 0.3 percent, much lower than the average for February.
That said, RVI analysts said the used supply of full-size pickups is expected to ramp up in coming months, putting downward pressure on used prices for this segment.
In February, used supply of full-size pickups was already up by 4.5 percent year-over-year.
RVI expects this segment to see a price drop of 14.5 percent by 2018, caused in part to excess used supply as well as an expected rise in long-term gas prices.
On the other end of the retention spectrum last month, the luxury full-size sedan saw the largest drop in price, falling by 4.1 percent from January.
The luxury SUV (up 0.9 percent) and the full-size van segment ( up0.2 percent) were the only segments to see prices rise at all last month, according to the RVI report.
Through two months of the year, auction volume is up 8 percent against comparable weeks of 2014, according to the latest Economic Dashboard prepared by Ira Silver, the chief economist at the National Auto Auction Association.
For the month of February, auction volume jumped 5.2 percent year-over-year, the report indicated. January auction volume climbed 10.7 percent.
And those increases aren’t expected to stop any time soon, as NAAA president Ellie Johnson emphasized during a presentation at last week’s NAAA/IARA/CAR Conference in Las Vegas.
Citing Silver in her speech, Johnson said that, “there is good news ahead for the auctions. We can expect that the auction unit growth that began in 2012 will continue throughout 2015 and also 2016, for the longest string of yearly gains in the history of the data, which goes to 1997.”
She also noted that while commercial consignment will make up the lion’s share of the increases, expect dealer consignment units to climb each year, as well.
“On the business level, auctions will need to be prepared for more unit volume and to take advantage of this extended good business environment,” Johnson said.
More Data Points on Volume
In its Guidelines report for March, NADA Used Car Guide said that February auction volume for vehicles between 1 and 8 years old was steady on a month-over-month basis at just under 323,000 units.
Off-rental-heavy 2014 model-year volume was down 2 percent, coming in slightly above 65,000 units. This marked the first decrease in over six months, NADA indicated.
“However, volume for the more off-lease-laden 2012 and 2013 model years increased by an average of 7 percent to 62,000 and 51,300, respectively,” NADA Used Car Guide’s Jonathan Banks explained in the report.
“Conversely, waning off-lease supply led to a 9-percent drop in 2011 model-year volume, while the number of remaining model-year units fell by an average of 4 percent,” Banks continued. “Although auction supply fell relative to January, the month finished with volume almost 5 percent higher than it was last February, thereby pushing the year-to-date change in volume up to 6.6 percent.”
There are a few different ways to look at the increase in off-lease volumes expected to hit the wholesale market in 2015 and in years to come. One, of course, is the macro numbers.
In a recent Perspective report, NADA Used Car Guide predicts this year will show another 20-percent rise in off-lease volumes, which are likely to come in at 2.35 million for 2015. NADA UCG is predicting that off-lease volumes will climb more than 67 percent between 2014 and 2017.
“The 25-percent lease penetration that we had this year (2014) — which represents about 3.2 million vehicles — that translates into record off-lease volumes coming back to the market in 2017,” NADA Used Car Guide’s Jonathan Banks said during a press conference at the NADA Convention & Expo.
Another way to consider off-lease supply is to examine the micro numbers, so to speak, particularly those shared by Auction Broadcasting Co. and its seven locations — each of which have undergone expansion and renovation in the past year.
Here’s a by-the-numbers rundown of how off-lease volumes have impacted the strategy of just one auction company, via ABC president Jason Hockett:
- ABC St. Louis, whose property is connected to Union Pacific Rail, added more than 20 acres of storage and doubled its body shop and reconditioning capacity. The auction also debuted a drive-through photo imaging center that Hockett said can take nine photos on more than 70 cars in an hour
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- The company put in 10 additional acres of storage, a four-bay mechanical shop and a new reconditioning center at ABC Baton Rouge.
- ABC Birmingham was expanded by 18 acres, upping its storage capacity to 55 acres. The auction also pushed its lane count from six to eight, while also adding new reconditioning, mechanical and body shop facilities.
- The company added a test track to its ABC Cincinnati facility. Interestingly enough, that auction also bought an adjacent dealership, then converted it to a recon and mechanical shop.
- The company continues to make progress on its 18-acre expansion and recon center renovations at ABC Detroit/ Toledo. Hockett said the growth would bump parking space up to 58 acres. Additionally, they plan to open a new photo imaging center by the end of April to help accommodate all the extra off-lease cars.
- ABC Lancaster Pennsylvania now has 60 acres of capacity thanks to the paving of an additional 9.5 acres. ABC bought a neighboring property, then flipped it into a new mechanical and inspection facility.
- The company completely renovated the office and arena at ABC Bowling Green Kentucky.
“In anticipation of the off lease volumes, ABC hopes to offer their clients a seamless and simple solution by offering marshalling, professional imaging, reconditioning, multi-platform upstream listings, and the proven success of selling in the live environment with the assistance of Edge Simulcast,” Hockett said.
Hockett’s peers in the industry have taken a similar proactive approach to expectations for a bump in volume.
Manheim North America president Janet Barnard said her company’s auctions have been preparing for the volume surge the past three years, and has made it a priority to help facilitate greater speed when it comes to buying and selling these off-lease cars.
“The thing that we’re focused on and a big part of our dealer focus is making all of those transactions happen more quickly,” Barnard said during a NADA Convention & Expo press conference. “For the past decade, these cars have sat on lots and collected dust, sometimes for weeks and/or months at a time. And no one can afford that anymore. And there’s demand.”
Over at ADESA, speaking in terms of lane capacity and labor force, chief executive officer and president Stephane St-Hilaire outlined how his company has prepared.
“We’ve seen it coming. We’re definitely ready; there’s no doubt about it,” he said. “We right-sized on the downturn a few years ago, but we maintained that capacity to increase at auction, both in terms of number of lanes, labor force and every step of the way, from consigning vehicles and completing a detailed condition report, according to the standards of the industry, all the way to moving vehicles around the lot.
“So, we have the capability to turn on the tap, so to speak, and face that from a storage standpoint, as well,” he added.
Bob McConkey, a partner in the McConkey Auction Group, also shared his group’s preparation.
“We never really downsized dramatically during the downturn in volume. We felt it was a cycle and that the volumes would rebound. We diversified our facilities; we engaged in retail reconditioning work maintaining our employee base and expertise,” McConkey said. “We are well-positioned for the off-lease volumes as well as the uptick in dealer consignment.
Further Impact of Supply
Hockett also touched on the role supply (the lack thereof and an impending increase) plays in channel selection, be it online or in-lane.
First, he started with the soft used supply in the past five years.
“As lease vehicles were being turned in to the dealerships. The dealerships were purchasing a large portion of them because the residuals were often times less than wholesale market. It was supply and demand,” Hockett said.
“Now that we are going to see a substantial increase in used volume, I believe that the wholesale market will be less than the residual values. If this is the case, the dealerships will pass on purchasing lease units at time of turn in and wait for them to sell in the auction environment,” he continued.
“As for how dealers will buy and sell inventory, they won’t have to buy vehicles 300 to 500 miles away. The dealers will have plenty of supply in their existing markets, which will reduce or eliminate additional transportation costs,” Hockett added. “Also, by purchasing vehicles in their local market, it will reduce the headaches and risk of buying a vehicle that wasn’t described accurately.
“We all look at vehicles differently, regardless of the algorithm to come up with a grading scale. The ‘human factor’ will always be there. New- and used-car dealers are some of the best business people you will ever encounter,” he continued. “Due to vehicle shortages, dealers learned to optimize their turn times by sourcing the ‘right vehicles’ for their places of business. I don’t expect that to change as volumes increase.”
Staff Writers Sarah Rubenoff and Nick Zulovich contributed to this report.
Even before the major winter weather hit much of the country in February, it seems shoppers were already in the market for more snow-efficient models.
Last month, demand for small and midsize trucks rose, making these desirable units hard to find on dealer lots.
That’s according to January’s scarcity data for CPO and used vehicles provided to Auto Remarketing monthly by AutoTrader.com.
The big story line this past month was a dwindling supply of small trucks, especially for the CPO Chevrolet Colorado and CPO GMC Canyon, as well as the CPO Toyota Tacoma.
“Car shoppers are waking up to the new and upcoming offerings in the once sleepy midsize truck segment, resulting in demand outstripping supply, according to AutoTrader.com’s monthly scarcity report,” said Michelle Krebs, senior analyst at AutoTrader.com.
For example, the CPO Chevrolet Colorado ranked 10th on AutoTrader.com’s national list of CPO and used vehicles in high demand and short supply last month.
When looking at specific metro areas across the U.S., the same CPO Colorado ranked even higher than it did nationally, Krebs pointed out.
The CPO Chevrolet Colorado was the No. 1 scarcest vehicle in Chicago; No. 2 in Philadelphia; No. 3 in Houston; and No. 5 in New York.
Krebs also reported that units “sibling,” the CPO GMC Canyon, also proved hard to find, coming in at the No. 10 hardest-to-find certified vehicle in Philadelphia.
“General Motors re-introduced the newest Chevrolet Colorado and GMC Canyon in 2014, after ending production of the earlier version in 2012. The new trucks bear little resemblance to the earlier ones, except in name,” Krebs pointed out.
“Interest in small-to-midsize trucks had waned to the point that Ford ended production of its Ranger, and Chrysler curtailed the Dodge Dakota. That left the Toyota Tacoma as the leader in the segment, which until the return of the Colorado and Canyon, only included the Nissan Frontier and Honda Ridgeline,” she continued.
Now, the tides have turned. In light of impressive sales of the new Colorado and Canyon, GM has added a third shift to produce the trucks that are “now in short supply at its Missouri plant,” Krebs said.
And according to AutoTrader.com shopping data, there has been renewed interest in smaller pickup trucks, with the Chevrolet Colorado out in front.
Gas prices fell dramatically during the second half of 2014 and still remain very low as 2015 gets underway and oil continues to lose value.
This has sparked a ripple effect throughout the automotive remarketing industry, turning many consumers toward truck and SUV purchases, as well as pushing prices up in the auction lanes for these very same vehicles.
And it seems to be impacting the leasing industry, as well, as recent data from Swapalease.com shows that there was a drastic increase in leasing trucks in 2014.
Expanding credit availability and lower fuel prices perhaps played a role in this movement, even though trucks traditionally haven’t made up a significant portion of the lease market.
According to Swapalease data, when comparing truck inventory and consideration data from 2014 against 2012, the site find that there has been significant growth in both the number of shoppers driving truck leases, and those looking for truck leases.
"It has always been interesting to see trucks as a top driver of overall sales historically without this translating over to lease activity," said Scot Hall, executive vice president at Swapalease. "I think what you're seeing today, however, is a shift among traditional drivers of trucks who now see the value of strong lease deals available for popular truck models. Furthermore, the typical driver of a truck has always had the mindset of holding onto that vehicle for a long period of time, and truck technology is now advancing and refreshing more frequently, giving rise to the number of drivers who wish to upgrade every few years."
On top is the Chevy Silverado, which has seen a 286.4-percent jump in Swapalease.com inventory and an 89.6-percent spike in shopping consideration over the last two years.
The Ford F-150 has also seen growth, as inventory for this model on the site has grown by 69 percent when compared to 2012, while searches jumped up by 89.6 percent.
The Dodge Ram 1500, another example of truck interest, saw a 79.3-percent jump in inventory and an 11.1-percent increase in searches.
Lastly, the Toyota Tundra saw an impressive jump of 110 percent in inventory and 27.6 percent in searches.
Interestingly, the increased interest in trucks also served to push average transaction prices up in the used market last year.
That’s according to analysts at Edmunds.com, whose latest Used Vehicle Market Report shows in 2014, the average 1-year-old vehicle sold for almost $30,000, which is 5.7 percent higher than in 2013.
Rapidly dropping gas prices played a role in boosting average retail used-car prices, Edmunds analysts pointed out.
According to the report, lower gas rates drew consumers toward larger, less fuel-efficient vehicles, which tend to tout higher price tags — such as trucks.
Also, as lower interest rates were more prevalent and longer loan-terms became the norm last year, shoppers were able to purchase more expensive used vehicles.
And dealers looking to ramp up used inventory of trucks to meet demand may be paying a bit more in the lanes.
According to the latest Guidelines report from NADA Used Car Guide, gas prices are also expected to play a part in ramping up truck prices during February and March.
Pickup prices were already on the way up during the first month of the year, with prices rising by 7.9 percent year-over-year, according to NADA UCG.
