Top Trends That Will Drive the Used Vehicle Market

Top Trends That
Will Drive the Used
Vehicle Market
Tom Webb
Chief Economist
Cox Automotive
Atlanta, GA
404-568-7554
[email protected]
Mandy Savage
General Manager
Manheim Detroit
Detroit, Michigan
678-206-4386
[email protected]
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OBJECTIVES
• Identify key industry trends and used car market
shifts impacting the automotive ecosystem
• Share 7 tips to drive efficiency
into your wholesale operations
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THEME
Coming increases in wholesale supplies will
put pressure on wholesale pricing and, more
importantly, retail margins.
To relieve that pressure dealers will need to
secure and manage inventory more efficiently
and effectively.
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MILLIONS OF UNITS
Used Vehicle Production
Source: Automotive News
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MILLIONS OF UNITS
New Vehicle Lease Originations
Source: Manheim Consulting
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MILLIONS OF UNITS
Total Wholesale Supply: Off-lease
Source: Manheim Consulting
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MILLIONS OF UNITS
Certified Pre-Owned Sales
Source: Automotive News
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CPO as % of New Vehicle Sales Over Prior 4 Years
Source: Manheim Consulting
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New Vehicle Sales into Rental
Source: Auto Rental News & Automotive News
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MILLIONS OF UNITS
Total Wholesale Supply: Off-rental
Source: Manheim Consulting
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Distribution of New Vehicle Sales into
Rental by Manufacturer
Source: Bobit Business Media
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Rental Risk Vehicles Remarketed at Auctions
2011 Q3
2014 Q3
2015 Q3
Number of unique
year, make, model,
body configurations
sold
2,216
3,303
3,756
Share accounted for
top 10 YMMB
28.2%
17.3%
15.6%
Share accounted for
top 25 YMMB
46.5%
21.7%
26.9%
Number of YMMB to
reach 50% share
31
86
85
Source: Manheim Consulting
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The Retail Financing Market
LONGER LOANS WITH
LOWER DOWNS TO
LOWER FICOS
RECORD LEASE PENETRATION
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Auto Loans Outstanding
Source: Federal Reserve Bank of New York
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S&P Auto Credit Default Index
Source: S&P
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MILLIONS OF UNITS
Number of Auto Loans Outstanding
90+ Days Delinquent
Source: Federal Reserve Bank of New York
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MILLIONS OF UNITS
Number of Repossessions
Source: Manheim Consulting
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Total Wholesale Supply: Off-rental,
Off-lease, & Repos
MILLIONS OF UNITS
But the total wholesale market is more
than 20 million transactions per year
Source: Manheim Consulting
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% Change Used Units Retailed – Same Store Basis
(
PUBLICLY -TRADED DEALERSHIP GROUPS)
Source: Company filings
*KMX shifted forward one month to correspond with calendar quarter
Weighted average for KMX *, AN, PAG, SAH, GPI, ABG, and LAD
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Used Vehicle Retail Gross Margin
(
Source: Company filings
PUBLICLY -TRADED DEALERSHIP GROUPS)
*KMX shifted forward one month to correspond with calendar quarter
Sales-weighted average for KMX *, AN, PAG, SAH, GPI, ABG, and LAD
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Current State of
Dealership Sales
& Profitability
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What did we Hear?
• Used Car Sales
expected to
continue to soar
• Off lease volumes
are high
• Lot of opportunity
with CPO
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Margins Continue to Decline
(
Source: Company filings
PUBLICLY -TRADED DEALERSHIP GROUPS)
*KMX shifted forward one month to correspond with calendar quarter
Sales-weighted average for KMX *, AN, PAG, SAH, GPI, ABG, and LAD
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Current State of
Car Buying
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CyclicalMarket:
Market: What
What Goes
AACyclical
Goes Up
Up Must
MustCome
ComeDown
Down
U.S. LIGHT VEHICLE SALES
20
18
16
14
12
10
8
6
4
2
0
1980
1985
1990
1995
2000
2005
2010
2015
adjusted
Source: Bureau of Economic Analysis (BEA)
Source: Bureau of Economic Analysis (BEA)
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Consumers spend
14
44
shopping for a car
hrs
min
with
59%
They visit
an average of
5.2
sites
77%
that did visit
a dealer group
site also visited
a third-party site
of it online
Source: 2016 Car Buyer Journey Study
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%
70
of car buyers did not
know what vehicle
they wanted when
they started shopping
%
71
purchased the
vehicle they then
intended to buy
Source: 2016 Car Buyer Journey Study
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Driving Efficiency Wholesale and Speed
can Protect Profitability
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Current Wholesale Activities
In-House
Outsourced
Does not use service
ACQUISITION
TRANSPORTATION
RETAIL INSPECTION
RECONDITIONING
DETAIL
MERCHANDISING
Source: Manheim Vehicle Solutions Study
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ONLY
%
are satisfied with your
current wholesale process
Source: Manheim Vehicle Solutions Study
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7 WHOLESALE OPERATIONS
Ways to Speed Up Your
32
#1
Use stocking tools to identify
in-demand vehicles
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#2 Use online channels to buy
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condition reports & purchase
#3 Use
protection to prevent arbitration
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#4
Get vehicles reconned &
detailed at the auction
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How quickly are you
getting your vehicles
reconned & detailed?
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7-10
Number of days
it takes the average
dealer to recon
Source: vAuto
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<3
Source: vAuto
Number of days
it takes the top 20%
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#5
Get your vehicles online
before leaving the auction
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How quickly
are you getting
photos up
online?
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12.5
Average number
of days for
listings to appear
with photos
Source: vAuto
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4
Average number
of days for
top 20% of dealers
Source: vAuto
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Speed to Market Correlates to
Inventory Turn = Profitability
Avg. # days to
website w/photos
DEALER A
DEALER B
Source: vAuto
Avg. # days
Autotrader w/photos
Avg. # days
in inventory
1
1
22
11
9
35
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#6
If you can’t get vehicles online
before leaving the auction,
detail them before recon, take
pictures and get them online!
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#7
Tweak your transportation &
logistics model
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7 Tips Summary
1. Use stocking tools to identify in-demand vehicles
2. Use online channels to buy
3. Use condition reports & purchase protection to prevent
arbitration
4. Get vehicles reconned & detailed at the auction
5. Get your vehicles online before leaving the auction
6. If you can’t get vehicles online before leaving the auction,
detail them before recon, take pictures and get them online!
7. Tweak your transportation & logistics model
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Change now
while times
are good
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Questions
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Top Trends That
Will Drive the Used
Vehicle Market
Tom Webb
Chief Economist
Cox Automotive
Atlanta, GA
404-568-7554
[email protected]
Mandy Savage
General Manager
Manheim Detroit
Detroit, Michigan
678-206-4386
[email protected]
Please visit the NADA Pavilion
in the Expo Hall for information
on accessing electronic versions
of this presentation and the
accompanying handout
materials, and to order the
workshop video recording.
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