October 2012

Hurricane Sandy to Make Used Inventory Even Tighter; Dealers Should Expect Price Hike


As of press time, Hurricane Sandy was headed West, leaving much of the Northeastern states scrambling to recover power and get flooding under control while assessing the damage of the powerful storm.

With vehicle damage already reported, Black Book’s Ricky Beggs offered Auto Remarketing some insight into how the storm may affect the used-car market in the coming months.

The Black Book managing editor stressed that used-car inventory may become even tighter for dealers in an already difficult environment.

“There is going to be a quick influx of demand for additional used cars, especially all the way up the East Coast, and will reach up to New England and down South,” Beggs said. “People are going to need to replace damaged vehicles.”

In fact, the calls had already started coming in on Monday.

“We had a customer call out of Nags Head, N.C., yesterday (Monday), and he was already looking for a value to replace a collectable-type car that had been damaged in the storm. The effect (of the storm) will be wide reaching, for sure,” Beggs said.

And Sandy may bring prices up for used vehicles, as well, both in the lanes and on the lots. After a brief reprieve from high auction prices, dealers had been seeing some price softening this fall season while buying in the lanes.

That might all be about to change.

“I think we will see a little bit of a price bump in the market; I expect prices to definitely be impacted,” Beggs said.

However, he offered a caveat, as well.

Beggs explained that one “fortunate thing about the industry” is that not all the units needed to fulfill demand after the storm will come from one particular section of the country – in this instance, the Northeast.

With online auctions and high-tech transportation services, most of the cars needed to replace units damaged from Sandy will come from all over the country and be distributed all along the East Coast.

Spreading the buy-ups out will help wholesale prices to stay even and not spike too high in one concentrated area.

“It is not going to be that the edge of the storm gets all the business — it  is going to come from all over,” Beggs added.

Auto Remarketing also asked Beggs which particular segments were going to see the biggest price spikes in the coming months.

First, he shared that all segments will rise, “because most people will go back to what they had,” explaining shoppers will replace their damaged vehicle with a similar unit. 

That said, Beggs predicts the full-size pickup truck segment — which has retained relatively consistent values for the past few months — may “see some real demand” and higher price spikes.

The service industry may contribute to this price hike.

“A lot of the trucks up there in the service industry got damaged, and they will be replaced. And No. 2, people in the service industry have aging vehicles already, and they can see an opportunity and are getting in the market, as well,” Beggs said, noting these two factors will contribute to the truck segments' potential price spike in the coming months.

Lastly, the editor offered some tips for dealers that have been affected by the storm and are assessing damage.

“Prepare. Get cars; even if you are not sure what you are going to need yet. Focus on getting inventory – people are going to need that,” Beggs said.

And it looks like online auctions may see a rise in business in the coming months as dealers rush to fill their lots in the wake of the storm.

“Dealers in the Northeast will go all over the country, and you will see more activity online. You have got OVE, and all different online sources from the online auction companies. They will be utilized,” Beggs concluded.

Auto Remarketing also reported on how Hurricane Sandy — or “Frankenstorm” as people have dubbed the pre-Halloween tempest — will potentially affect new-car sales for October.

Edmunds.com offered insight into which nameplates are most popular in the areas affected by the storm as well as why November will be an “interesting” month to watch for the industry.

To view the article, see here.

NADA Foundation to Provide Emergency Relief Fund to Assist Victims of Hurricane Sandy

In other news to hit the stands in the aftermath of Hurricane Sandy, the National Automobile Dealers Association announced dealership employees who have been affected by the disaster are eligible to receive financial assistance from the Emergency Relief Fund of the National Automobile Dealers Charitable Foundation.

“It’s too early to know the extent of the damage to auto dealerships from the storm. Widespread power outages have disrupted communications, including phone service, in many of the hardest hit areas,” said David Hyatt, vice president of public affairs for NADA. “It will likely take days or even weeks before we start to get a clear picture of what's needed for storm relief.”

NADA will be working with the state and metro dealer associations in the affected regions of the country to notify dealers and their employees that financial assistance from the Foundation’s Emergency Relief Fund is available, officials shared.

Employees can apply directly to NADA for emergency assistance or dealers can apply on behalf of their affected employees.

To fill out a Emergency Relief Fund’s assistance application form, visit the link here.


Role of Fleet, Lease & Rental Units in Wholesale Volume Activity

CARY, N.C. - 

If recent predictions from Edmunds.com come to fruition, the number of lease terms coming to an end next year will eclipse 2.5 million units, which would be an increase of 484,000 units from 2012.

In other words, look for a big jump in the amount of lease returns flowing into the used-car market next year.

And this expected uptick in off-lease volume looks like it may help supply in the auction lane. In fact, the National Auto Auction Association forecasted in a recent Auction Industry Report that a projected turnaround in fleet/lease consignment numbers — as well as manufacturer/factory consignment numbers — will lead to a “noticeable overall gain” in auction volume for 2013.

In an interview with Auto Remarketing at the NAAA Conference in early October, Manheim Pennsylvania vice president and general manager Tim Van Dam echoed that sentiment.

He is expecting a big gain in volumes at his location, particularly on the fleet/lease side of the equation.

Van Dam noted that across the industry, some of the auction’s commercial accounts will likely double in remarketing volume in 2013 and most will “grow dramatically.”

Van Dam added: “Those types of vehicles coming back in will really drive the market, a. And rental car fleets are also growing.”

At Manheim Pennsylvania alone, total volumes (including all segments) are expected to climb by 30,000 units in 2013, Van Dam said.

Offering the perspective of a consignor, Bob Graham —– the vice president of vehicle remarketing at ARI — said his company is expecting a significant uptick in vehicles remarketed this year and next.

“ARI has seen a dramatic increase of about 25 percent over last year, and 2012 will be a record year for the volume of vehicles we remarket,” Graham said. “We expect 2013 to be equally as strong with an additional 5-percent to 10-percent increase.”

2012 Consignment Behavior

As far as how the different consignment avenues have trended in 2012, NAAA said that in the first half of the year, dealer consignment numbers jumped 7.2 percent year-over-year, fleet/lease sales fell 8.2 percent and OEM/factory sales dipped 7.8 percent.

The aforementioned declines for fleet/lease and OEM/factory sales, however, are much less steep than the respective 23.1-percent and 25.2-percent drop-offs for these segments for full-year 2011.

“This year, as the negative impact of weak new sales in 2008 and 2009 on current FL-MF (fleet/lease and manufacturer/factory) auction volume lessens, total volume is expected to increase during the second half,” explained NAAA economist Ira Silver in the August report that examined the first half of the year.

Sharing some more recent findings, Van Dam told Auto Remarketing in early October that he had noticed an increase in the rental fleet at his auction, which is fairly typical for this time of year.

However, he said, “it’s a little bit more balanced than in years past,” pointing out that instead of a late-August flood of rental fleet vehicles, there has been a steady influx.

Continuing on, Van Dam said that dealer consignment “has been strong for us all year,” and that by the eend of the year, he hopes to be up about 10,000 dealer cars sold compared to 2011. On the factory side, Van Dam expects this to increase next year, but this year the numbers have been down.

“I think that’s kind of to be expected,” he explained. “Some of their lease portfolios didn’t get put into the service in 2009 or 2008, and now they’re coming back in.”

The analysis from Edmunds predicts less than 2 million lease terminations for full-year 2012, continuing a streak of declining numbers of leases coming to term. However, the more than 2.5 million lease terminations projected for 2013 would the highest number since 2010.

Pricing Trends & More

When it comes to pricing in these segments, recent analyses diagramed some of the trends spotted during the third quarter. First, a report on wholesale prices from ADESA’s Tom Kontos broke down July and August numbers.

Prices in manufacturer consigment droped 1.7 percent sequentially in July, then followed that up with a 4.4-percent decline in August. However, in the latter month, prices were still 2.8 percent ahead of August 2011.

“The increasing rate of month-over-month decline may have been a precursor of continued downward price pressure on manufacturers’ vehicles in anticipation of more off-rental (program) vehicles entering the market after Labor Day,” Kontos said.

“The increasing rate of month-over-month decline may be an indication of continued downward price pressure on manufacturers’ vehicles as more off-rental vehicles began entering the market after Labor Day,” he continued.

(In fact, Kontos’ analysis on September trends — released less than a week after the July/August analysis — indicates that OEM consignment prices dropped  6.6 percent month-over-month in September while falling 0.9 percent year-over-year, “indicating downward price pressure on manufacturers’ vehicles as more off-rental vehicles began entering the market after Labor Day.”)

Turning to the fleet/lease side of the market, Kontos found that these consignors saw their prices drop 1.3 percent month-over-month in July but only 0.6-percent in August. This led to a 1.9-percent year-over-year decline in August.

Kontos added: “Dealer consignors saw a 3.5-percent average price decrease versus June and a 1.4-percent decrease versus July, resulting in prices being down 4.8-percent versus August 2011.”

Meanwhile, in his report on September wholesale values, Manheim chief economist Tom Webb took a special look at off-rental pricing, which continued at high levels.

“The average auction price for rental risk units sold at auction rose in September versus August and a year ago,” Webb said. “Volume for the month and average mileage were less than last year.”

During his quarterly conference call in early October, Webb would add: “The off-rental prices, basically you look at it as a straight average, have been at a record high and continue to go up.

“Even when you make all of the adjustments, they are close to a record high,” he noted. “The movement from there obviously would be some sort of downward pressure just because of the market.”

Webb also touched on his expectations for off-lease volume during the call.

“I believe the growth in off-lease volumes is more of a 2014 event than a 2013 event,” he said.

“Since the leases coming off in 2013 will have contract residuals in tune with market values, we can expect that the return rate will remain relatively low,” he continued. “Needless to say with all things being equal, a high return rate will have a bigger impact on wholesale values.

“Certainly particular makes and models that did subvent their leases and pushed them out too heavily will have a problem when they come back,” Webb added. “But for the market as a whole, that is not the case.”

Consignor Best Practices

Beyond sharing some consignment data with Auto Remarketing, ARI’s Graham also offered a few points on challenges and best practices from his perspective as a remarketer.

He emphasized the importanance of improving inspections and making them more consistent, while also stressing tailoring pictures for online buyers.

“Also standardizing the arbitration rules and expectations between in-lane and online buyers is a challenge,” Graham said.

“We are working through the IARA to provide our feedback and best practices to the NAAA and keep an open dialogue with auction chains and independents,” he continued.

When asked what today’s buying dealer demands in the wholesale lane, and how his company will respond  as a consignor, Graham said transparency and consistency are at the top of the list.

“They need us to announce vehicles properly and then treat them fairly both in-lane and online if they have a legitimate issue.

“They also want us to run vehicles consistently and sell when the vehicle is on the money,” he added. “Being a good seller through understanding that the buyer is critical to our success and meeting their needs is the core to building the ARI brand and selling more vehicles.”

Editor's Note: This article is part of our special section covering fleet, leasing and retal trends in the Nov. 1–14 print edition of Auto Remarketing. More coverage on those sectors of the auto market can be found in that issue.


TransUnion Study: Consumers Who Actively Monitor Their Own Credit Open Far More New Auto Loans


A new TransUnion study found that people who monitor their own credit files open significantly more new auto loans and credit cards, and perform generally as well on those loans as consumers who do not monitor their own credit.

The company's study determined that consumers who monitor their credit in any given credit score range not only open far more new accounts than those who do not, but it may indicate that these consumers recognized the importance of a healthy credit profile, and are actively looking for ways to improve it prior to making new purchases.

"Our study started with the conjecture that individuals who monitor their credit health might be motivated the same way as people who monitor their physical health," said Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit.

"We assume the latter generally fall into two categories: healthier people who want to stay that way, and less healthy consumers who want to become fit," Becker continued.

"We have found that consumers who monitor their credit tend to fall into two similar groups: credit-healthy consumers who wish to maintain that health and/or guard against identity theft; and riskier consumers that are looking to take proactive measures to better manage their credit profiles in anticipation of acquiring additional credit."

TransUnion's "Impact of Credit Self-Monitoring on Consumer Performance" study revealed that nearly 3.4 percent of consumers who monitored their credit during the study timeframe opened a new auto loan, while only 1.9 percent of consumers who did not monitor their credit opened an auto loan.

Analysts discovered this trend held true for other credit instruments such as general purpose credit cards, where nearly 6.3 percent of consumers monitoring their credit opened new credit cards. They said only 4.3 percent of consumers not monitoring their credit opened new credit card accounts in the same period.

"This finding was a key insight, as consumers who monitor their credit appear to be more receptive to new credit offers and are actively looking to open new accounts at far greater rates than non-monitoring consumers," Becker said.

"Perhaps even more compelling is that the delinquency rates on these new loans in the credit monitoring population are only slightly higher than those of the non-monitoring population when controlling for credit score, indicating that adverse selection, while present to a certain extent, is less of a risk for lenders," he continued.

The study looked at the VantageScore credit score distribution of the credit monitoring population versus that of the non-monitoring population. The credit score distribution of the monitoring consumer group was riskier than the non-monitoring group: 50.4 percent of the monitoring consumer population had non-prime credit scores (VantageScore credit score less than 700), compared to 40.1 percent of the non-monitoring population.

"The difference in score distribution tends to support the theory that many self-monitoring consumers are doing so because they wish to improve their credit profiles," Becker said. "It is also why we have to control for credit score in studies such as this."

In the prime and better risk tiers, the 60-day or worse delinquency rate on new auto loans opened by the credit self-monitoring population was 2.0 percent, compared to 1.5 percent for the non-monitoring population.

Similarly, the 90-day or worse delinquency rate on new credit cards opened by the credit self-monitoring population was 2.5 percent, compared to 1.9 percent for the non-monitoring population.

"While there is an increase in risk among these self-monitoring consumers, that risk remains generally on the same order of magnitude as that of the non-monitoring population. As well, the incremental risk appears to be more than offset by the increase in credit demand," Becker said.

"This is valuable insight for lenders who may be interested in marketing to consumers whom they may not have valued as prospective customers otherwise," he went on to say.

TransUnion's research study examined and analyzed nearly 15 million U.S. consumers during a 2 1/2-year period. The study timeframe looked at consumers who monitored their own credit files over a six-month window from May 2009 through October 2009.

The study then looked at the new loan accounts opened by this population over the subsequent three months and compared it to a control population of non-monitoring consumers over the same period.

Finally, the study measured borrowing/balance activity and payment behavior on those new loans for up to 24 months through November of last year, again comparing these results against those of the control population over the same time period.

Westlake Spotlights Top Regional Auctions for Quarter


Westlake Financial Services honored four auctions on Tuesday, announcing the third quarter’s top regional performers and the company’s Top Service Auction.  Earning recognition from Westlake were:

•    Eastern Region: Rawl’s Auto Auction (South Carolina)

•    Central Region: Kansas City Independent (Missouri)

•    Western Region: Brasher’s Sacramento (California)

•    Top Service Auction:  ADESA Lexington (Kentucky)

 “We are proud of the accomplishments of these auction partners and look forward to strengthening our relationships in the future,” said Bill Walters, vice president of remarketing at Westlake.

During the quarter, Westlake brought on Dirk Grammel as its Southern regional auction representative and Jeff Huang as Pacific regional auction representative. Grammel and Huang — along with Northeastern regional auction representative Ryan Twigg — shared some comments about the winning auctions.

Starting with Rawl’s Auto Auction, Grammel said it was pushed to the top spot in the Eastern region thanks in part to its customer service efforts.

“They also stand out for their effective marketing ideas,” he said.  “Westlake enjoys exemplary vehicle processing, sales preparation and consistent sales results.”

Overseeing the Missouri market, Grammel has found that Kansas City Independent “exceeded our expectations for sale preparation, operations and marketing and sales results.”  

He said the team there “has a unique personal approach to handling buyers and sellers. This sets them apart from other auctions and brings dealers back to their sales consistently.”

Regarding Brasher’s Sacramento, Huang said: “Brasher’s is all about providing a consistent level of service and being able to anticipate our needs. They understand Westlake’s collateral and what is needed to optimize our recovery.”

Meanwhile, ADESA Lexington had the top score on Westlake Remarketing’s vehicle certification program, giving it the Top Service Auction award for the quarter.

“ADESA Lexington takes a great deal of pride in how they run their sales — from vehicle prep to marketing to understanding our program requirements,” Twigg said. “Their efforts are reflected in the results. They utilize a team effort to get our products to the right buyers.”

Auto Data Direct Expands Program to Include Calif. Motor Vehicle Records


Auto Data Direct announced Tuesday it has added California motor vehicle records to its DMV123 program.

With this addition, the company now has access to 28 state databases.

"Since 1999, our core business has been to provide real-time motor vehicle inquiry solutions to DPPA qualified companies," said Jim Taylor, president of ADD.

"Our customers value a single point of access for records. With our DMV123 program, they can easily retrieve a single record online without going to multiple sources. Through a partnership with DealerTrack and its Vehicle Inquiry Interface, we have added California to the selection of available states which will be tremendously beneficial to those businesses looking for accuracy and efficiency in their business transactions,” he continued.

ADD’s web-based system is available to companies who need access to accurate, real-time motor vehicle records to complete business transactions, the company shared.

The company contends the program can help users in the following instances: "insurer processing a claim, a financial institution verifying ownership, or a tow operator in need of registrant and lienholder information to file a notice of claim of lien."

DMV123 records are made available through a secure internet connection, based on a company's qualifications under the Federal Driver's Privacy Protection Act.

The company also highlighted some of the records available to users.

Real-time motor vehicle records include owner, lienholder, registration and vehicle data such as make, model, year, tag and title number.  

Moreover, ADD is a provider of National Motor Vehicle Title Information System vehicle history records.

In addition to California records, ADD offers access to Alabama, Arizona, Arkansas, Florida, Georgia, Idaho, Kansas, Louisiana, Maine, Maryland, Kentucky, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Mexico, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Tennessee, Texas, Utah and Wisconsin.

For more information, see www.add123.com.

MetroGistics ‘Monster Mash’ Raises $18K for Charities


Halloween came early to transportation company MetroGistics, as the company welcomed vampires, zombies and other two-legged creatures to its first Monster Mash fundraiser.

Benefiting two charities for four-legged friends, the Monster Mash raised more than $18,000 for Stray Rescue of St. Louis and Project VIP (Very Important Pets). It was held on Oct. 20 at MetroGistics’ headquarters.

Stray Rescue of St. Louis rescues and restores stray animals in need of medical attention, and places them in loving, adoptive homes. Project VIP is a television program dedicated to educating viewers and encouraging them to foster or adopt abandoned and abused pets.

The 200 event attendees at Monster Mash enjoyed hors d’oeuvres and drinks, a silent auction of more than 50 items, a costume contest and music from a DJ.

MetroGistics, which was founded by William Billiter and Scott Naz, said it actively supports local charities through its employee-driven MetroGistics Charity Program and through fundraisers like the Monster Mash.

“Everyone here at Metro had lots of fun and we hope our guests did too,” said Billiter. “Thanks to everyone who attended, our sponsors, and anyone who made a donation – all went toward great causes! We look forward to next year’s event.”

Event sponsors, the company said, included John Eccher; Comp-U-Help Computers; McCarthy, Leonard & Kaemmerer, L.C.; Wilkie Bros. Conveyers; Cope Brothers Landscaping; RBO Print Logistix; PNC Bank; Seafoam Media; Elder and Associates; Finney’s MMA; Wors Consulting; JR Data Source Tech; Glow Co Tan; Riverside Motors; Page Law; and All Star Physical Therapy.