'Non-traditional' channels, off-lease utilities to see growth in 2018

ATLANTA  - 

You can expect another year of 10 million wholesale vehicles at traditional, brick-and-mortar auto auctions in 2018.

But that comes with a twist, according to Cox Automotive’s 2018 Used Car Market Report & Outlook. There is also some change afoot in what the off-lease supply might look like. 

Starting with wholesale, the report’s section on wholesale volumes and pricing was written by Zohaib Rahim, manager of economic industry insights at Cox Automotive .

In that section, Rahim said wholesale volumes at physical auctions should remain at this “near-record” height referenced above. In 2017, the tally was close to 10 million, according to an estimate of member auction sales by the National Auto Auction Association cited in the Cox Automotive report. 

However, look for a spike in the number of cars going into off-site digital channels, Rahim said in the report.

“If 2017 was the year of traditional auctions, 2018 will be the year of an increase in non-traditional channels,” Rahim wrote. “Total wholesale transactions in a given year are more than twice the NAAA-member volume. Other channels include direct sales between dealers — sometimes with a wholesaler as an intermediary — commercial accounts selling directly to dealers or retail customers, and sales at non-NAAA member auctions.”

Rahim goes on to point out that lease returns, a major source of used-car supply, will go through a number of various channels — including, but not limited to, the physical auctions — to reach the wholesale market.

“Still, despite the large volume in the other channels, it is the real-time, competitive-bid price discovery in the auction channel that serves as the benchmark for pricing in the other venues,” Rahim said.

Speaking of lease returns, the report suggests the new-car market will see a bit more impact from them this year than in recent years. Rahim explained in the leasing section of this report that this trend is due to greater share of utility vehicles in the off-lease crop.

And with that being a popular segment right now on the new-vehicle side, it could pressure the new side of the market a bit more than did sedans, which aren’t as popular, he said.

In fact, Cox Automotive is estimating the CUV’s share of off-lease to climb by about 3 percentage points this year and then more than 3 points in 2019.

Cars, meanwhile, are likely to see their share of off-lease dip by more than 4 percentage points both this year and next.  

“Though Cox Automotive expects the wholesale and used-vehicle markets to absorb the volumes of off-lease units returning to market, the mix of off-lease vehicles poses the biggest challenge to new-vehicle sales for dealers and automakers. Used retail demand is strong,” Rahim writes. “Plus, nearly new vehicles with similar technologies will pose an attractive value proposition for consumers on the fence between a new or a used vehicle.

“In addition, the bulk of off-lease units in 2017 were traditional cars at a time when consumers clearly preferred crossovers and sport utilities. The next couple of years will bring the higher volumes of nearly new utility vehicles back to the market as off-leases vehicles, and these vehicle types are in high demand by consumers,” he said. “In 2018, Cox Automotive estimates some of the largest growth in off-lease volume will be of vehicles like the Chevrolet Silverado pickup truck and the Nissan Rogue and Toyota RAV4 crossovers. These undoubtedly will be in high demand.”

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