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December 2016 Kontos Kommentary

Current Used Vehicle Market Conditions and Outlook


Summary

Wholesale prices did a bit of an about-face in December, as truck price softening, perhaps influenced by higher gasoline prices, drove down overall results. New vehicle incentive activity also remained high, which, along with higher fleet sales, helped the year close out with a new record in sales but put downward pressure on wholesale values. Fortunately, certified pre-owned (CPO) used vehicle sales also hit a new record, helping absorb growing used vehicle supply and limiting the negative impact to wholesale prices.


Details

According to ADESA Analytical Services’ monthly analysis of Wholesale Used Vehicle Prices by Vehicle Model Class1, wholesale used vehicle prices in December averaged $10,642 – down 0.3% compared to November but up 3.9% relative to December 2015. Truck prices, which fell 0.6% month-over-month, led the overall monthly decline, consistent with rises in gasoline prices during the month that some dealers may have seen as a longer term trend. Particularly hard-hit were prices for full-size and luxury SUV/CUV models, as well as full-size vans. Passenger car segments, on the other hand, registered price gains during the month, with only luxury and sporty cars (which tend to be less fuel efficient) showing declines.

Average wholesale prices for used vehicles remarketed by manufacturers were down 4.2% month-over-month and down 0.4% year-over-year. Prices for fleet/lease consignors were down 1.5% sequentially but up 1.0% annually. Average prices for dealer consignors were flat versus November but up 1.1% relative to December 2015.

December CPO sales were at record levels and were up 14.7% month-over-month and 2.4% year-over-year, according to figures from Autodata. For the year, CPO sales were up 3.5%, setting a new record at 2.64 million units.

Average new vehicle incentives were again above $3,000 and were nearly $1,000 higher than year-ago levels based on Edmunds data.

Fleet sales were up by 122,364 units and totaled almost 2.8 million in 2016, according to Bobit Business Media data. This helped total new vehicle sales top the 2015 record of 17.5 million, as 2016 sales were up by 56,211, according to Automotive News Data Center.

1 The analysis is based on over six million annual sales transactions from over 150 of the largest U.S. wholesale auto auctions, including those of ADESA as well as other auction companies. ADESA Analytical Services segregates these transactions to study trends by vehicle model class.

The views and analysis provided herein relate to the vehicle remarketing industry as a whole and may not relate directly to KAR Auction Services, Inc. The views and analysis are not the views of KAR Auction Services, its management or its subsidiaries; and their accuracy is not warranted. The statements contained in this report and statements that the company may make orally in connection with this report that are not historical facts are forward-looking statements. Words such as “should,” “may,” “will,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “bode”, “promises”, “likely to” and similar expressions identify forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected, expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include those matters disclosed in the company’s Securities and Exchange Commission filings. The company does not undertake any obligation to update any forward-looking statements.

Wholesale Price Data by Model Class Segment - December 2016
Wholesale Price Data by Model Class Segment History 2015-122016
Wholesale Price Data by Model Class Segment - Full History 2011 - 012016
ADESA Analytical Services Selected Model Class Segments
Wholesale Price Data by Model Class Segment - Full History 2000 - June 2012

Kontos Kommentary - December 2016