At a Glance

Continuing the trend of the past year, now is a good time for fleets to be remarketing vehicles. Trends among commercial fleet vehicles entering the wholesale market include:

• The average fleet price at resale is $10,936.

• The average fleet vehicle mileage at resale is 69,724.

• The 2010 models make up the highest volume of models with six of the top 10 resale volume models from that model-year.

What can the market expect of wholesale price trends in the second-half of 2012? Relative price stability and strong demand as consumers look to rid themselves of their aging vehicles.

If we only knew what tomorrow would bring, would that change how we would make certain decisions? It is well-known that hindsight offers an always clear 20/20 vision. But, as experienced fleet managers, there are numerous files of information and analytics to blend with your experience to consistently make the best decisions that rely on foresight and not hindsight.

Part of the information is knowing what history shows us and making informed decisions from that point of view. Adding in projected information from solid independent sources, complemented with your experience, enables your team, division, company, and/or client to be on target with the necessary, but, often, difficult decisions.

Looking Back

Looking back shows us a tremendously active and strong used-vehicle market over the past few years. This strength is easy to explain as there are two main factors.

First, a low supply of used vehicles driven by hugely depressed new-vehicle sales since 2009. Second, a struggling economy and lack of consumer confidence pushing owners/buyers to either not purchase vehicles or purchase used instead of new vehicles due to tight household budgets, and, generally, financing for a shorter loan term.

Directly related to commercial fleet, many companies also elected to extend replacement cycles on some models instead of replacing them. Businesses were focused on cost-cutting measures while just riding out the recession.

The past two-plus years have witnessed historically high used-vehicle value retention. I have said it several times while tracking the market: Today is a great time to be a seller in the wholesale arena.

The last quarter of activity was very typical of the fall season and end-of-the-year market with each vehicle segment declining and the total group of two- to six-year-old models down by 4.7 percent for the three-month period. With compact cars and entry-level cars declining by just over 8 percent each for the quarter, these were the segments with the greatest levels of change. The market is fickle when it comes to gasoline prices at the pump. The recent climb to the $3.89 per gallon national average has helped small-car retention, but has not been detrimental to most trucks and utilities.

During this same time, there were six segments that declined less than 3 percent from -1.1 percent for mid-size pickups to -2.6 percent for mid-size SUVs.

Typically, after the New Year celebrations are completed, resale market activity picks up in January and, with the anticipation of “tax refund season,” overall trending improves. During January 2012, we saw only two segment types increase. Mid-size pickups and cargo minivans both increased, even though it was the very small amount of 0.1 percent. There were 12 other segments that declined 1 percent or less.

Evaluating Today’s Market

Currently, within the commercial fleet market, the 2010 models make up the highest volume of models as six of the top 10 volume models are from that year. There were 15 segments that increased during the month of March. None of the declining car segments are high-volume, fleet-type units. The segment containing the highest fleet penetration, the full-size car, increased 1.4 percent for the month with an average segment price for 2010 models at $16,500. Of the three-year-old models, there were six segments that declined less than 1 percent.

As Black Book works with the major fleet management companies (FMCs), the most recent quarterly report presents some startling numbers. With an average fleet vehicle price of $10,936, these vehicles do well for the below-prime market due to price level, age, and mileage. We all know how large the market is for below-prime credit customers these days.
For vehicles remarketed during the past quarter, the average age was 41 months and had an odometer reading of 69,724 miles. All told, this was right at a historic $260-million worth of vehicles for the quarter. The bread and butter of this inventory are mid- and full-size sedans, complemented by compact crossovers.

Looking Ahead

Fleet managers often anticipate where the market will be tomorrow, next week, next month, or even a year from now. They then wonder what scenario might arise to alter that previously educated prediction.

Hopefully, catastrophic events such as last year’s Japanese earthquake and tsunami don’t raise their disastrous heads again. Instead, the market should look for continued improvement and availability of consumer loan funding to help get the almost $1-billion worth of wholesale fleet merchandise that will come through the FMCs and sold to the retail consumer in 2012. The market volumes will still be limited, funding is available, the average age of cars on the road is at a record level of almost 11 years, and there is pent-up demand just waiting for a reason to replace an older vehicle with a newer one. So, as a seller of out-of-service fleet vehicles, it will be another great year to be on the remarketing side of the industry.

About the Author

Ricky Beggs is vice president and managing editor of Black Book. He can be contacted at RBeggs@blackbookusa.com.