UPDATE: Story reflects updated numbers from Cox Automtoive for 2017 total volume.
What Cox Automotive described as the “total volume of wholesale requiring disposal” will reach a peak this year.
Specifically, 16.6 million units are projected to be wholesaled, up from 16.4 million units last year, 15.9 million units in 2017 and 15.5 million units in 2016.
It is expected that 9.6 million of those vehicles will be wholesaled at physical auctions this year, Cox Automotive said, down from 9.8 million in 2018 and 10.0 million in 2017. In 2016, 9.9 million units ran at physical auctions.
The company is expecting an increase in upstream volumes (offsite and online sales) and dealer-to-dealer volumes.
Here’s how that shakes out:
— Commercial direct-to-consumer: 700,000 (same as 2018, but up from 600,000 in both 2017 and 2016).
— Direct-to-dealer/dealer-to-dealer: 4.9 million (up from 4.7 million in 2018, 4.3 million in 2017 and 4.1 million in 2016).
— Offsite/online: 1.4 million (up from 1.2 million in 2018, 1.0 million in 2017 and 900,000 in 2016).
“Like 2018, this year is poised to be a great year for offsite digital volume growth,” Cox Automotive analysts said in a Data Point report this week. “That does not mean traditional auction volume will collapse, but growth in the flow of vehicles will favor non-traditional channels and not the physical lanes.”
There are a number of elements at play when looking at the sources of wholesale vehicles.
Off-lease volume growth is “limited” and expected to occur predominantly in the first half of the year, Cox Automotive chief economist Jonathan Smoke said during Friday’s Q1 Manheim Used Vehicle Value Index call. This would likely be followed by year-over-year decreases in the back half, he said.
Likewise, over at Edmunds, analysts said in the company’s Used Vehicle Outlook that off-lease volume should peak this year.
“Lease returns have been on the rise but will top out this year with 4.3 million expected to come off lease,” Edmunds said in the report.
Most other sources of wholesale volume should see modest movement either direction this year, Smoke said.
With dealer consignment, which is declining, Cox Automotive explained that given the strength in retail used-car demand, dealers aren’t wholesaling as much.
“Dealers want to retail as many of the units as they get themselves on trade, so they’re not having to wholesale as much,” Smoke said during the call. “Plus, the rise of dealer-to-dealer platforms, including our own Manheim Express, is part of that transition, too.”
In fact, after an estimated 39.5 million retail used-car sales in 2018, Cox Automotive is forecasting 39.5 million used-car sales again this year, followed by 39.2 million in 2020.
Even though the retail used-car is set to “peak into a plateau,” this year should still be the “strongest used environment of this expansion,” Cox Automotive manager of economic and industry insights Zo Rahim said during a conference call on Cox Automotive’s Q1 Market Review.
Another factor: repossession volume, which should climb only a bit, Smoke said. Cox Automotive pointed out in the Data Point report that, “Repossessions have only slightly increased even with record amounts of outstanding loans as defaults remain low with very low unemployment and higher disposable income.”
And on the rental car side of consignment, Cox Automotive anticipates “slight gains,” Smoke said, which is reflects “units that are new bought into rental are pushing older units out, and we’re seeing some stability in the mileage and that implies consistency on that end.”
Smoke is also seeing rental companies choose to sell more rental risk vehicle direct-to-consumer.
He said that “a smaller percentage of rental units are actually ending up in the wholesale market in either a digital or physical platform, because all the major rental car companies have had aggressive strategies about selling direct retail to consumers.
“And that’s actually a key reason why we keep emphasizing the statistics on the rental composition; essentially the units are much more retail ready and friendly to the retail market," he said, “and in fact, they are buying with retail in mind, giving them the ability to sell those vehicles in their own stores, assuming retail demand continues to be strong.”