Wholesale Market Keeps the Industry Flowing
The supply of used vehicles entering the market in 2013 is increasing, creating a “pretty solid” environment for resale. The remarketers of tomorrow may face some challenges.
With 60 percent of new-vehicle sales bringing a trade-in to the wholesale channel, 2014 estimates show a return to prerecession levels of 2007. The lowest total light-duty sales and trade-in volumes occurred in 2009.
1. Numbers for 2013 to 2014 are projections.
2. Inventory trade-in calculations are based on 60 percent of new-car sales.
Whether you are a franchised or independent dealer, a large or small fleet management company, or part of the lending community, the wholesale market and channels that support the distribution of used vehicles continues to adjust.
Note: You can click the image at the beginning of this article to view all of the charts referenced within. All charts are courtesy Black Book USA.
There is no question that the transaction by a consumer who purchases a new or used vehicle from a franchised or independent dealer in a retail environment is the starting point leading to the values at the wholesale level. And, one must also distinguish the differences within the wholesale channels.
As a fleet remarketer, you are a solid source of good, used vehicles that normally do not compete directly against new sales. Your opportunities are with a focused used buyer and finding the correct wholesale channel to supply that market. The cost is not just what one dealer will offer for a trade-in, or what he or she will ask on the auction block or in an online listing. It entails much more, such as buy and sale fees, transportation to and from the auction or lot, and also necessary reconditioning.
Black Book continues to see more and more vehicles purchased sight unseen, or at least only “seen” through an online condition report. This enables a vehicle to be offered to more potential buyers and, in some cases, offered even before it is taken out of service (with a fleet or as a rental unit).
Reporting the market values has evolved significantly over time to now include the traditional physical and emerging electronic lanes . The speed in changing the market values is almost expected to be instantaneous as there is more transparency in the wholesale market activity and market values than ever before. There still remain opportunities for arbitrage, but many of those opportunities disappear quickly due to the industry transparency, and will then show up as another opportunity.
Since the 2008 economic recession, the positive movement in the market has made heroes out of remarketers while creating the challenges for those remarketers of tomorrow. Risk analysts must understand there is currently a changing used market with even more adjustment coming.
Now that the Seasonally Adjusted Annual Rate (SAAR) has climbed consistently to about 15.3 million, the supply of used vehicles into the market in 2013 is increasing and we are not too far from prerecession levels. With Black Book expecting new-car sales levels to hit 16 million in 2014, we will be just short of prerecession levels for new sales and ultimately used market volume levels and values.