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November 2016 Kontos Kommentary

Current Used Vehicle Market Conditions and Outlook


Summary

Trucks continue to drive overall average wholesale prices upward, while car price softening more directly reflects supply growth for the used vehicle market in general. A new threat to used vehicle prices seems to be arising from increased new vehicle incentives, which have been relatively benign through this cycle of price softening, but which we have warned might become more of a factor going forward as a result of plateauing 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 November averaged $10,678 – up 1.4% compared to October and up 2.3% relative to November 2015. However, this result was largely driven by truck prices, which rose 2.2% sequentially and 5.2% annually; prices for the car segments fell 0.3% month-over-month and 4.1% year-over-year.

Average wholesale prices for used vehicles remarketed by manufacturers were down 0.6% month-over-month but up 4.9% year-over-year. Prices for fleet/lease consignors were up 1.3% sequentially and up 2.0% annually. Dealer consignors registered a 0.7% average price decrease versus October and a 1.9% decrease relative to November 2015.

According to NADA data, both franchised and independent dealers saw month-over-month decreases in retail used vehicle sales (franchised down 3.3%, independent down 4.8%), but registered increases versus prior-year (franchised up 3.2%, independent up 4.3%). For the year, retail used vehicle sales are up 4.8%. November CPO sales were down 2.1% month-over-month but up 10.0% year-over-year, according to figures from Autodata. For the year, CPO sales are up 3.6%.

Edmunds average new vehicle incentives data showed increases of 11% month-over-month and 37% year-over-year and were above $3,000 for the first time since April 2009.

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 - November 2016
Wholesale Price Data by Model Class Segment History 2015-112016
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 - November 2016