™ 41st Annual AFLA Conference

Volatility & Opportunities While Managingthe Matrix of ChangeSeptember 10, 2009

rbeggs@BlackBookUSA.com770.533.5221www.BlackBookUSA.com

Volatility & Opportunities

Economy

Slow Retail Sales – Auto & Consumer Goods Government

local cut backslower tax collectionsschools cutting backonly the Federal Gov’t not cutting back

Unemployment 9.7%…but not the worst ever

Unemployment Rates - Historical

Source : http://data.bls.gov/

0

2

4

6

8

10

121/

1/19

48

2/1/

1951

3/1/

1954

4/1/

1957

5/1/

1960

6/1/

1963

7/1/

1966

8/1/

1969

9/1/

1972

10/1

/197

5

11/1

/197

8

1/2/

1982

2/2/

1985

3/2/

1988

4/2/

1991

5/2/

1994

6/2/

1997

7/2/

2000

8/2/

2003

9/2/

2006

Une

mpl

oym

ent R

ate

[%]

Nov./Dec. 198210.8%

Aug. 20099.7%

Unemployment Rates

Source :http://data.bls.gov/map/servlet/map.servlet.MapToolServlet?survey=la

Unemployment Rates by State, seasonally adjusted, July 2009

11.9

12.5

11.915.0

11.210.610.4

11

10.711.0

11.8

10.7

National Average for August 2009 = 9.7%Historical High in Nov./Dec. 1982 = 10.8%

10.2

10.3

10.6R.I. 12.7

• Home Equity

• Tighter Credit Scores

• Tighter Funding

• Home Mortgages – Foreclosures/Values

Automotive Credit IssuesAutomotive Credit Issues

Auto Loan Delinquency

0.00.51.01.52.02.53.03.54.0

Auto Loan DelinquencyDirect Indirect

Highest in19 years!

Q1

1990

Q1

1991

Q1

1992

Q1

1994

Q1

1995

Q1

1996

Q1

1997

Q1

1993

Q1

1998

Q1

1999

Q1

2000

Q1

2001

Q1

2002

Q1

2003

Q1

2004

Q1

2005

Q1

2006

Q1

2007

Q1

2008

Q1

2009

Pe

rce

nt

Source : American Bankers Association

Other Loan Delinquencies

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Bank Cards Home Equity*

Source : American Bankers Association

Highest in19 years!

* Seasonally Adjusted starting 2002

Per

cent

[%

]

Q1

1990

Q1

1991

Q1

1992

Q1

1994

Q1

1995

Q1

1996

Q1

1997

Q1

1993

Q1

1998

Q1

1999

Q1

2000

Q1

2001

Q1

2002

Q1

2003

Q1

2004

Q1

2005

Q1

2006

Q1

2007

Q1

2008

Q1

2009

Foreclosure Rates

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000 Q

2 2

005

Q3

20

05

Q4

20

05

Q1

20

06

Q2

20

06

Q3

20

06

Q4

20

06

Q1

20

07

Q2

20

07

Q3

20

07

Q4

20

07

Q1

20

08

Q2

20

08

Q3

20

08

Q4

20

08

Q1

20

09

Q2

20

09

Foreclosures by Quarter

REO's

Total

…but 93% of homes pay on time !

229%

16%

30%

21%

Gasoline Prices

Source : www.eia.doe.gov

Automotive Trends

Year-To-Year Trend

10000

12000

14000

16000

18000

20000

22000

24000

Jan.08 Aug.08 Dec.08 Jan.09 Apr.09 Aug.09

Domestic Car

Domestic Truck

Import CarImport Truck

Year-To-Year Trend

-1671

-3434

-2350

-4106

-803

1866

274

1822

-4500 -3500 -2500 -1500 -500 500 1500

Domestic

Domestic Truck

Import

Import Truck

Average Dollar Change in 3 Year Old VehicleJan.- Aug.09 Jan.- Aug.08

Best Performers* of 2008 & 2009

Sporty Car

-$642(-3.1%)

Entry Mid-Size

Car-$98

(-0.8%)Upper

Mid- Size Car-$76

(-0.6%)

Entry Level Car

-$58(-0.7%)

Compact Car

$642(6.3%)

Jan.-Aug. '08

*2006 Models

Full - Size Pickup+$2493(+15.6%)

Full- Size SUV

+$3837(+21.8%)Mid- Size

SUV+$2915

(+20.7%)

Compact SUV

+$2825(+21.7%)

Luxury SUV

+$2468(+8.2%)

Jan.-Aug. '09

*2007 Models

*3 Year Old Vehicles

0.0% 1.0% 2.0% 3.0% 4.0%

2007 Pontiac Grand Prix Base 4D Sedan2006 Dodge Grand Caravan SXT Wagon

2006 Chevrolet Impala LT 4D Sedan2007 Chrys ler Town & Country LX Wagon …

2005 Chevrolet Impala Base 4D Sedan2007 Dodge Charger Base 4D Sedan2006 Dodge Charger Base 4D Sedan2008 Chevrolet Impala LS 4D Sedan2007 Chevrolet Impala LT 4D Sedan

2006 Chevrolet Impala LS 4D Sedan

2007 Chevrolet Impala LS 4D Sedan

Greatest Volume Fleet Vehicles *

*Q2 2009 6 out of top 11 vehicles are Impalas

2007 Chevrolet Impala LS

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

$14,000

$15,0003/

1/20

074/

1/20

075/

1/20

076/

1/20

077/

1/20

078/

1/20

079/

1/20

0710

/ 1/ 2

007

11/ 1

/ 200

712

/ 1/ 2

007

1/1/

2008

2/1/

2008

3/1/

2008

4/1/

2008

5/1/

2008

6/1/

2008

7/1/

2008

8/1/

2008

9/1/

2008

10/ 1

/ 200

811

/ 1/ 2

008

12/ 1

/ 200

81/

1/20

092/

1/20

093/

1/20

094/

1/20

095/

1/20

096/

1/20

097/

1/20

098/

1/20

099/

1/20

09

BB AVG Wholesale

Trend to Continue?

2007 Vehicle Trends

$7,000

$9,000

$11,000

$13,000

$15,000

$17,000

$19,000

$21,0004

/ 1/ 2

00

75

/ 1/ 2

00

76

/ 1/ 2

00

77

/ 1/ 2

00

78

/ 1/ 2

00

79

/ 1/ 2

00

71

0/ 1

/ 20

07

11

/ 1/ 2

00

71

2/ 1

/ 20

07

1/ 1

/ 20

08

2/ 1

/ 20

08

3/ 1

/ 20

08

4/ 1

/ 20

08

5/ 1

/ 20

08

6/ 1

/ 20

08

7/ 1

/ 20

08

8/ 1

/ 20

08

9/ 1

/ 20

08

10

/ 1/ 2

00

81

1/ 1

/ 20

08

12

/ 1/ 2

00

81

/ 1/ 2

00

92

/ 1/ 2

00

93

/ 1/ 2

00

94

/ 1/ 2

00

95

/ 1/ 2

00

96

/ 1/ 2

00

97

/ 1/ 2

00

98

/ 1/ 2

00

99

/ 1/ 2

00

9

BB AVG Wholesale

2007 Town & Country LX

2007 F150 XLT +$1400 (6 mths)

+$1400 (3 mths)

+$2500 (1 yr)

Fleet Model Years *

20035% 2004

7%

200513%

200632%

200732%

200811%

20091%

* Q2 2009

Fleet Vehicles (Biggest Losers*)

0 5000 10000 15000 20000

Luxury Car

Mid-Size Car

Compact Car

Full-Size Car

Sporty Car

Aug08 Aug09

*2007 Vehicles Only Sold in Q2 2009

Fleet Vehicles (Winners*)

0 5000 10000 15000 20000

Cargo Van

Crossover SUV

Passenger Van

Mid-Size SUV

Pickup

Aug09 Aug08

*2007 Vehicles Only Sold in Q2 2009

Looking Ahead…The Opportunities

36-Month $ Residual Trend

*2010 Residuals as of 9/01/2009

20

00

04

00

00

60

00

08

00

00

***************

*

*

****************

********

***********************

**

*****

*

2007 2008 2009 2010*median= 14999 median= 15083 median= 13720 median= 15878mean= 18061 mean= 18504 mean= 17181 mean= 18754sdev= 10575 sdev= 11175 sdev= 11080 sdev= 10486

N= 285 N= 291 N= 273 N= 123

36-month January 1 Residuals [dollars] for 2007, 2008, 2009, 2010 Models [ALL MODELS]

36-Month % Residual Trend

*2010 Residuals as of 9/01/2009

3040

5060

2007 2008 2009 2010*median= 47.26 median= 47.23 median= 41.28 median= 48.67mean= 46.96 mean= 47.27 mean= 41.97 mean= 48.03sdev= 7.14 sdev= 6.61 sdev= 7.41 sdev= 6.62

N= 285 N= 291 N= 273 N= 123

36-month Jan.1 Percent.Residuals [percent] for 2007, 2008, 2009, 2010 [All Models]

36-Month $ Residual Trend

*2010 Residuals as of 9/01/2009

200

0040

000

600

0080

000

*

**

*

**

**

***

**

*****

*

*

***

*

*

*

2007 2008 2009 2010*median= 14927 median= 14879 median= 13409 median= 15578mean= 17644 mean= 18115 mean= 16103 mean= 18601sdev= 10265 sdev= 10944 sdev= 10087 sdev= 11043

N= 76 N= 76 N= 76 N= 76

36-month January 1 Residuals (Common Models) [dollars] for 2007, 2008, 2009, 2010 Models

36-Month % Residual Trend

*2010 Residuals as of 9/01/2009

3035

4045

5055

60

2007 2008 2009 2010*median= 47.48 median= 47.25 median= 41.72 median= 46.63mean= 47.32 mean= 47.29 mean= 40.86 mean= 46.66

sdev= 6.94 sdev= 6.62 sdev= 6.56 sdev= 6.07N= 76 N= 76 N= 76 N= 76

36-month Jan. 1 Percent.Residuals (Common Models) [percent] for 2007, 2008, 2009, 2010 Models

36-Month $ Residuals : Winners and Losers

•Difference is in 36-month Residuals when expressed in dollars.•Note : Number in parenthesis indicates number of models in segment.

0 2000 4000 6000 8000

Entry Level CarEntry Mid-Size Car

Compact CarFull-Size Car

Compact PickupFull-Size Pickup

Full-Size CUVMid-Size SUVFull-Size SUV

Luxury SUV

2009 to 2010 Difference * [$](4)

(3)

(2)(5)

(3)

(2)(6)

(5)(5)

(4)

36-Month % Residuals : Winners and Losers

•Difference is in 36-month Residuals when expressed in percentageNote : Numbers in parenthesis indicate number of models in segment

0 5 10 15

Entry Level CarPrestige Luxury Car

Premium Sporty CarEntry Mid-Size Car

Near Luxury CarFull-Size Pickup

Luxury SUVFull-Size CUVMid-Size SUVFull-Size SUV

2009 to 2010 Difference * [%]

(3)(3)

(2)(4)

(5)

(4)(5)(5)

(1)(4)

Flex Fuel Hybrid Hybrid 2-Mode : GM, BMW, Chrysler (gone) Diesel Electric Driving CAFÉ Standard by 2016

Alternative Fuels

Hybrid vs. Gasoline (Escape)

-2000

0

2000

4000

6000

8000

10000

Dol

lars

Escape Hybrid Premium [$]2005 [$]2006 [$]2007 [$]2008 [$]

Hybrid vs. Gasoline (Escape)

-10%0%

10%20%30%40%50%60%70%80%

Perc

enta

ge

Escape Hybrid Premium [%]

2005 [%]2006 [%]2007 [%]2008 [%]

Diesel Over Gas Premium* [$]

010002000300040005000600070008000

Diesel Over Gas Premium [$]

Silverado 2500

Ram 2500

F250SD

Liberty

New Beetle

Jetta

E Class

* 2006 & 2007 Models

Dol

lars

MSR

P

Apr.0

8Au

g.08

Dec

.08

Apr.0

8Au

g.09

Aug.

07D

ec.0

7

Diesel Over Gas Premium [%]

0%

50%

100%

150%

200%

250%

300%

350%

Silverado 2500

Ram 2500

F250SD

Liberty

New Beetle

Jetta

E Class

Diesel Over Gas Premium [% of MSRP]

* 2006 & 2007 Models

280%

125%

163%

35%

9500

13500

17500

21500

25500

Dolla

rs

2007 Tahoe LS 4D Utility 4WD

2007 Prius 4d HBK

2007 Grand Cherokee Laredo 4D Utility 4WD2007 Fusion SE 4D Sedan 4 Cyl

2007 Silverado 1500 LT Ext Cab 4WD 4D

Do

llar

sVolatility to Reasonable to Steady

+$480

013

wks

-$1040027 wks

-$305014 wks

+$27008 wks

+$11007 wks

+$5007 wks

+$10003 wks

Volatility (Trucks)

7000

11000

15000

19000

23000

27000

31000

35000

Aug.08 Feb.09 Aug.09 Aug.10

Valu

e [$

]

Escalade

SRX

Silverado 1500

Tahoe

Explorer

F150

4Runner

Grand Caravan

2007 Models

Val

ues

[$]

Volatility (Trucks)

7000

11000

15000

19000

23000

27000

31000

35000

Aug.08 Feb.09 Aug.09 Aug.10

Valu

e [$

]

Escalade

SRX

Silverado 1500

Tahoe

Explorer

F150

4Runner

Grand Caravan

2007 Models

Val

ues

[$]

Volatility (Trucks)

7000

11000

15000

19000

23000

27000

31000

35000

Aug.08 Feb.09 Aug.09 Aug.10

Valu

e [$

]

Escalade

SRX

Silverado 1500

Tahoe

Explorer

F150

4Runner

Grand Caravan

2007 Models

Val

ues

[$]

Volatility (Cars)

5000

7000

9000

11000

13000

15000

17000

Aug.08 Feb.09 Aug.09 Aug.10

Valu

e [$

]

Camry

Taurus

Impala

SebringVal

ues

[$]

Volatility (Cars)

5000

7000

9000

11000

13000

15000

17000

Aug.08 Feb.09 Aug.09 Aug.10

Valu

e [$

]

Camry

Taurus

Impala

SebringVal

ues

[$]

Volatility (Cars)

5000

7000

9000

11000

13000

15000

17000

Aug.08 Feb.09 Aug.09 Aug.10

Valu

e [$

]

Camry

Taurus

Impala

SebringVal

ues

[$]

Bankruptcy* Effect on Values

0%

5%

10%

15%

20%

25%

30%

35%

40%

2- Year Depreciation (2007 Models) [%]Bankruptcy Extinct Remaining

Vib

e

Mat

rix

Cal

iber

Cob

alt

Cor

olla

Foc

us

Mal

ibu

Fus

ion

Cam

ry

Tah

oe

G6

Exp

editi

on

VU

E

CR

-VR

av4

Out

look

Aca

dia

*Lower is Better

Bankruptcy* Effect on Values

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

2- Year Depreciation (2007 Models) [$]Bankruptcy Extinct Remaining

Vib

e

Mat

rix

Cal

iber

Cob

alt

Cor

olla

Foc

us

Mal

ibu

Fus

ion

Cam

ry

Tah

oe

G6

Exp

editi

on

VU

E

CR

-VR

av4

Out

look

Aca

dia

*Lower is Better

Cash for Clunkers (What’s Ahead for Retail?) Bankruptcy Brand Fewer Dealerships-Smaller Inventories Remarketer’s Internet Auctions Types of Models, Engine Size, Fuel Efficiencies Alternative Fuels – CAFÉ by 2016 (35.5 mpg) Gas Prices and Their Effects Limited Supply of Used Vehicles How High Can It Go? (Monthly $, New vs. Used) Information is King!

Final Thoughts

Change-Tough But Inevitable…What You Did in the Past Won’t Work Today or Tomorrow-Applies to

Buying and RemarketingTimely, Independent, Accurate

™

Thank youRicky BeggsP.O. Box 758

Gainesville, GA 30503770.533.5221

rbeggs@blackbookusa.com