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October 2016 Kontos Kommentary

Current Used Vehicle Market Conditions and Outlook


Summary

The softening wholesale price environment became more apparent in October, as wholesale supply continues to grow while retail demand weakened. For the first time this year, new vehicle sales on a year-to-date basis fell below last year's levels, indicating that total sales in 2016 may not match the 2015 record of 17.5 million. However, the decline from that all-time high should be moderate.


Details

According to ADESA Analytical Services’ monthly analysis of Wholesale Used Vehicle Prices by Vehicle Model Class1, wholesale used vehicle prices in October averaged $10,499 – down 2.2% compared to September but up 3.0% relative to October 2015. As has been the norm, average prices for cars were down on a year-over-year basis (-1.2%), while truck prices were up significantly (5.1%), driving the overall year-over-year increase. Several truck segments showed monthly price declines of greater than four percent, indicating the generally softening wholesale price environment is even starting to hit trucks.

Average wholesale prices for used vehicles remarketed by manufacturers were down 0.9% month-over-month but up 8.6% year-over-year. Prices for fleet/lease consignors were down 2.6% sequentially but up 1.0% annually. Dealer consignors registered a 3.0% average price decrease versus September but a 1.3% increase relative to October 2015.

According to NADA data, both franchised and independent dealers saw month-over-month decreases in retail used vehicle sales in the 14-15% range. For the year, however, retail used vehicle sales remain up 4.2%. October CPO sales were down 0.7% month-over-month and down 3.2% year-over-year, according to figures from Autodata. For the year, however, sales are up 3.0%.

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 2016
Wholesale Price Data by Model Class Segment History 2015-102016
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 - October 2016