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October 2014 Kontos Kommentary

Current Used Vehicle Market Conditions and Outlook


Summary

As in September, a large proportion of higher priced, late-model manufacturer off-rental program vehicles, some of which were sold after delays due to recalls, biased average wholesale prices upward and masked the inherent softness of a wholesale used vehicle market facing high incoming supply. Retail used vehicle demand did not provide quite the support to auction prices it had in previous months, as franchised dealers did well simply to retail the many units they have been taking from off-lease purchases and in trade on strong new vehicle sales.


Details

According to ADESA Analytical Services’ monthly analysis of Wholesale Used Vehicle Prices by Vehicle Model Class1, wholesale used vehicle prices in October averaged $9,678 -- up 1.3% compared to September and up 0.9% relative to October 2013. As in September, average prices for minivans were up significantly, but this reflects an increase in the percentage of current and one-year-old models sold in factory sales.

Prices for used vehicles remarketed by manufacturers were down 11.3% month-over-month and 8.6% year-over-year, as manufacturers sold off elevated program vehicle inventories, including recalled units. Prices for fleet/lease consignors were down 3.7% sequentially and 2.2% annually. Prices for off-rental “risk” units within this segment were again down significantly. Dealer consignors were the only seller group that saw average price increases in October, registering a 1.4% increase versus September and a 0.7% increase relative to October 2013. This bodes well for the wholesale market’s ability to absorb excess dealer trades.

Retail used vehicle sales in October were down 18.0% month-over-month and 3.8% year-over-year, based on data from CNW Marketing/Research. However, franchised dealers saw a 2.2% year-over-year increase, indicating they are having success in retailing the many trade-ins they are taking in light of strong new vehicle sales. According to Autodata, sales of certified pre-owned (CPO) vehicles were up 7.5% versus September and 13.8% from the prior year. Strong CPO sales have been particularly useful in absorbing high incoming lease volumes.

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 - October 2014
Wholesale Price Data by Model Class Segment - Full History 2011 - 102014
ADESA Analytical Services Selected Model Class Segments
Wholesale Price Data by Model Class Segment - Full History 2000 - June 2012