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2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T
USED CARINDUSTRYREPORTT A B L E O F C O N T E N T S
5 I N T R O D U C T I O NBy Michael R. Linn, President, NIADA Services
6 S E C T I O N O N ENIADA Membership Data
14 S E C T I O N T W OUsed Car Industry Data from CNWMarketing Research
24 S E C T I O N T H R E EBuy-Here, Pay-Here Industry Benchmarks
28 S E C T I O N F O U R“2008 Dealer Walk-In Traffic Study Results,”Presented by Northwood University andAutotrader.com
30 S E C T I O N F I V EAuction/Remarketing Commentary by TomWebb of Manheim and Tom Kontos of ADESA
32 S E C T I O N S I XNIADA Membership Survey
Used Car Dealer (ISSN 0279425X) is published monthly with one additional special issue, Used Car Industry Report, that is published in May bythe National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203; phone (817)640-3838. Annual subscription rates for NIADA members: $8 per year. Non-member subscriptions $80 per year. Periodicals postage paid atArlington, TX, and at additional offices. POSTMASTER: Send address changes to Used Car Dealer, 2521 Brown Blvd., Arlington, TX 76006-5203.The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of Used Car Dealeror the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as member ofNIADA, does not constitute an endorsement of the products or services featured. Copyright© 2009 by NIADA Services, Inc. All rights reserved.
I N T R O D U C T I O N By Michael R. Linn, President, NIADA Services, Inc.
Welcome to the 2009
edition of NIADA’s Used
Car Industry Report. The
nation’s current economic
status makes the 11th
annual edition of this
Report even more impor-
tant to dealers and indus-
try officials than ever before.
When we published our first report in
1999, our goals were to define some statistics
on our member dealers and to add to the
research data covering the independent
segment of the automotive industry. Our
hope remains that this report will provide
dealers with statistical information to help
them build stronger business models and
achieve success. We also want industry offi-
cials to understand our dealers in order to
provide better products and services which
also aid everyone’s business operations.
There have been a multitude of changes
and improvements over the years. The easy
comparison is size. The 2009 Used Car
Industry Report is twice the size of our first
effort a little over a decade ago. But the core
of this report remains focused on several
stable, unchanged features. One of those
fixtures is the work of Art Spinella of CNW
Market Research, whose materials were
included in the very first edition and continue
to help our Report remain an invaluable
research tool.
The 2009 Report contains all of the tra-
ditional hallmarks with a few of its own
tweaks and improvements.
Section One includes the results of
our annual member survey. New survey
questions were added to the latest research
and new distribution methods were utilized
to reach dealers for the 2009 version. The
results were a tripling in the number of
members who responded to the survey.
Although previous surveys portrayed a
strong picture of our dealers, the increased
survey numbers solidified the statistics down
to a deeper level. The figures help dealers see
how their operations compare to other
dealerships across the U.S.
Section Two again brings the return of
CNW Market Research. Spinella’s figures
look beyond NIADA members and envelop
a comprehensive analysis of the industry
itself. His research describes the inventory,
financing methods, the transactions
themselves, plus aftermarket factors. His
statistical overview will give you a picture
of a sophisticated industry with complex
operations. Art Spinella is known as the
independent researcher that literally
everyone turns to. His work proves why.
Section Three features the Buy Here,
Pay Here Benchmarks developed by Ken
Shilson of Sub-Prime Analytics and the
National Alliance of Buy Here, Pay Here
Dealers along with NCM Associates. With
major changes in the nation’s economic envi-
ronment, the growing Buy Here, Pay Here
business suddenly became a bigger focus for
the industry in 2009. Prospective and current
BHPH business owners can use these
Benchmarks to determine where they should
be in comparison to others and how they can
more successfully build their operations.
Section Four is a look at a new topic
for the Used Car Industry Report. It
also contains unexpected information.
AutoTrader.com and Northwood University
partnered on a national research study to
determine if dealers were putting their
advertising dollars in the right place. In
interviews with both dealers and consumers,
the research concluded that dealers made
incorrect assumptions about their walk-in
traffic. The information learned from
consumers indicates dealers may want to
reconsider how they drive and focus their
marketing to reach potential customers.
Section Five highlights highly-respected
automotive economists -- Tom Kontos of
Adesa and Tom Webb of Manheim. As
economists, they both understand the
synergy between the independent dealer and
the auctions each one represents. Each year,
they analyze the past year’s activities which
impacted remarketing within the used motor
vehicle marketplace. Then they draw in
outside economic factors, try to see into the
future, and share their economic insight
with us. Their commentary can be the
tie that brings all of the sections into a coher-
ent pattern.
The Used Car Industry Report was
among the first analytical studies of its kind
and remains a viable research tool for
dealers, vendors, industry experts and
communicators. NIADA finds
it to be one of our most
frequently used tools as we
deal with those businesses
and individuals who are
involved in our industry.
We hope that you will
find the statistics and nar-
rative just as valuable for
your own needs.
A Publication Of The National Independent Automobile Dealers Association And Used Car Dealer Magazine
5
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T6
TYPES OF BUSINESSES YOU OPERATE(percentage of respondents)
RETAIL BHPH
80%
60%
40%
20%
0WHOLE-SALE
RENTAL LEASING SERVICEDEPT.
PARTSDEPT.
BODYSHOP
OTHER
78.371.0
27.225.6
39.841.4
9.23.63.5
22.121.5
5.85.5 5.15.2
2007
2-5EMPLOYEES
1EMPLOYEE
6-10EMPLOYEES
10+EMPLOYEES
NUMBER OF EMPLOYEES(percentage of respondents)
60%
50%
40%
30%
20%
10%
0
9.08.3
51.649.5
21.020.9 18.421.3
20082007
NUMBER OF YEARS IN BUSINESS(percentage of respondents)
20082007
1-5YEARS INBUSINESS
6-10YEARS INBUSINESS
11-20YEARS INBUSINESS
21+YEARS INBUSINESS
40%
30%
20%
10%
0
LESS THAN1 YEAR INBUSINESS
19.920.0
0.30.3
17.817.7
26.526.7
35.535.4
2008
7.014.19.4
NIADA MEMBERSHIP DATA
S E C T I O N
ONE
Each year, NIADA surveys itsmembers on a variety of topicswhich cover demographical andbusiness data. Results are com-pared with the previous year whichallow readers to see trends andchanges in the Used Car IndustryReport.
This year’s NIADA MembershipSurvey includes four new ques-tions concerning computer andinternet usage, warranty/servicecontracts and rental car operations.Those new questions are closelyrelated to existing queries; bothexisting and new questions areadjacent and are located on page12. The new questions, of course,do not include comparative data..The 2008-2009 recession and amajor increase in the number ofrespondents had some impact onthe latest statistics, but generallythe comparisons did not show dra-matic swings from previous years.
We would like to pay specialthanks to those member s who par-ticipate in this survey. Their infor-mation creates a resource that isused by dealers to provide a snap-shot of their own standing. It isalso used by vendors who provideproducts and services to help makethose dealers more successful.
____________________________
C o n g r a t u l a t i o n sto the following members who sub-mitted their forms in the NIADAMember Survey and were selectedas winners in a special drawing.
Winner of an NIADAAccountingManual was
Stephen C. WilliamsSpeedy Auto SalesSalida, Colorado
Winner of a NADAGuidesubscription was
Rich JonesJ.J. AutoMeridian, Idaho
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T 7
10,001-25,000SQ. FT.
UNDER10,000SQ. FT.
25,001-50,000SQ. FT.
OVER50,001SQ. FT.
DEALERSHIP LOT SIZE(percentage of respondents)
50%
40%
30%
20%
0
22.718.0
27.224.6
32.132.4
21.2 20.8
20082007
OTHERDEALERS
WHOLESALEAUCTIONS
ONLINE/OTHER
WHERE YOU YOUR CARS -WHOLESALE (percentage of respondents)
80%
60%
40%
20%
0
79.277.2
43.037.4
59.1
48.9
20082007
2-31 4-6 7+
NUMBER OF LOCATIONS(percentage of respondents)
80%
60%
40%
20%
0
1.62.6
0.8 1.1
20082007
WHERE YOU YOUR CARS -WHOLESALE (percentage of respondents)
80%
60%
40%
20%
0
66.266.9
20082007
AUCTIONS ATTENDED PER MONTH(percentage of respondents)
1-2 3-4 5-8 9+
30%
20%
10%
00
OTHERDEALERS
WHOLESALEAUCTIONS
ONLINE/OTHER
4.7 4.6
29.227.424.724.8
23.123.4
20082007
SPECIALIZE IN(percentage of respondents)
80%
60%
40%
20%
0
2007 2008
CARSONLY
TRUCKSONLY
OFFERBOTH
HEAVYDUTY
POWERSPORT’S
12.614.46.9 5.9
80.3
77.7
23.420.2
RV’S
18.914.0
77.483.6
42.136.1
51.043.3
18.419.7
SELL
BUY
F A C T S A N D S T A T I S T I C S O N T H E U S E D M O T O R V E H I C L E I N D U S T R Y
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T8
3-5 YEARS1-2 YEARS 6+ YEARS
AGE OF CARS SOLD(percentage of respondents)
80%
60%
40%
20%
0
11.810.9
62.363.4
30.727.6
2008AVERAGE RETAIL PRICE(percentage of respondents)
20082007
5,001-10,000
10,001-15,000
15,001-20,000
20,001+
50%
40%
30%
20%
10%
00-5,000
47.6 48.1
20.6 21.1
7.0 7.4 4.7 4.6
2007
18.820.2
FINANCECOMPANY
BHPH BANKS OTHER
HOW YOU FINANCE CUSTOMERS(percentage of respondents)
40%
30%
20%
10%
0
40.440.437.1
32.9
43.038.5
12.29.9
2007 2008
AUCTIONFLOORPLAN
BANKS CASH OTHER
HOW YOU FINANCE FLOORPLANINVENTORY(percentage of respondents)
40%
30%
20%
10%
0
43.343.1
17.715.8
48.2
43.6
9.98.8
NOTE: Numbers won’t necessarily add to 100% because dealers finance multiple waysNOTE: Numbers won’t necessarily add to 100% because dealers finance multiple ways
2007 2008
AVERAGE MONTHLY INVENTORY(percentage of respondents)
20%
10%
01-10 11-20 21-30 31-50 51-75 76-100 101-200 201+
2007 2008
7.07.0
13.313.214.814.9
23.523.0
13.613.411.511.4 10.310.1
6.07.1
1-20 3-5 6+
NUMBER OF SERVICE BAYS(percentage of respondents)
40%
30%
20%
10%
0
26.7 26.6
19.719.6
14.5 14.0
20082007
39.2 39.7
S E C T I O N
ONE
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T 9
INDOOR SHOWROOM(percentage of respondents)
2007 2008
YES19.9%
NO80.1%
YES20.2%
NO79.8%
YES38.2%
NO61.8%
YES38.0%
NO62.0%
SELL AFTERMARKET PRODUCTS(percentage of respondents)
2007 2008
PAVED LOT(percentage of respondents)
2007 2008
YES84.8%
NO15.2%
YES85.2%
NO14.8%
YES67.2%
NO32.8%
YES68.7%
NO31.3%
HAVE WORKERS COMP(percentage of respondents)
20082007
OUTSIDE LIGHTING(percentage of respondents)
2007 2008 FENCING ON PROPERTY(percentage of respondents)
2007 2008
YES94.7%
NO5.3%
YES94.0%
NO6.0%
YES52.6%NO
47.4%YES
53.6%NO46.4%
F A C T S A N D S T A T I S T I C S O N T H E U S E D M O T O R V E H I C L E I N D U S T R Y
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T10
YES83.8%
NO16.2%
YES83.8%
NO16.2%
YES89.9%
NO10.1%
YES90.4%
NO9.6%
HAVE COMMERCIAL INSURANCE(percentage of respondents)
2007 2008
FULLY INSURED INVENTORY(percentage of respondents)
2007 2008
YES21.9%
NO78.1%
YES22.1%
NO77.9%
SEPARATE F&I DEPARTMENT(percentage of respondents)
2007 2008
2007 2008DO RECONDITIONING/DETAIL WORK(percentage of respondents)
YES69.1%
NO30.9%
YES75.3%
NO24.7%
YES17.0%
NO83.0%
YES18.8%
NO81.2%
2007 2008USE PAYMENT PROTECTIONDEVICE (percentage of respondents)
YES57.5%
NO42.5% YES
57.8%NO
42.2%
DEALERSHIP WEB SITE(percentage of respondents)
2007 2008
S E C T I O N
ONE
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T 11
ANNUAL RETAIL SALES (percentage of respondents)
0-100vehicles
101-250vehicles
40%
30%
20%
10%
0251-400vehicles
401-550vehicles
551-700vehicles
701-850vehicles
8.57.0
40.040.2
20.019.5
1.71.4
851-1,000vehicles
1,001+vehicles
13.813.8
6.06.13.63.8
6.48.2
ANNUAL WHOLESALE SALES (percentage of respondents)
0-100vehicles
101-250vehicles
80%
60%
40%
20%
0251-400vehicles
401-550vehicles
551-700vehicles
701-850vehicles
75.176.6
12.613.4 5.35.4
1.41.0 1.31.6 1.01.0
2007 2008
.81.0 2.53.1
851-1,000vehicles
1,001+vehicles
ADVERTISING MEDIA USED (percentage of respondents)
TV NEWSPAPERS RADIO SPECIALTYPUBLICATIONS
ONLINE OTHER MAGAZINE
70%
60%
50%
40%
30%
20%
10%
0
2007 2008
61.565.8
30.230.031.9
34.7
47.944.5
15.213.8
9.613.8
NOTE: Numbers won’t necessarily add to 100% becausedealers advertise multiple ways
18.6 17.6
2007 2008
F A C T S A N D S T A T I S T I C S O N T H E U S E D M O T O R V E H I C L E I N D U S T R Y
RENTAL CAR(percentage of respondents)
2007 2008
YES13.0%
NO87.0%
YES14.0%
NO86.0%
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T12
INTERNET CONNECTION
HIGH SPEED DIAL UP OTHER
2008
5.6 0
90%
80%
60%
40%
20%
0
94.4
HOW DO YOU USE THE INTERNETAT YOUR BUSINESS
DEALERSHIPWEBSITE
E-MAIL INDUSTRYRESEARCH
ONLINEBUYINGAND
SELLING
ONLINEAUCTIONS
ONLINEFINANCING
OTHER
80%
60%
40%
20%
0
20.017.9
28.729.8
44.143.248.050.551.3
56.1
79.6 75.9
58.757.5
20082007
YES66.7%
NO33.3% YES
65.6%
NO34.4%
2007 2008SELL WARRANTIES OR SERVICECONTRACTS (percentage of respondents)
TYPE OF RENTAL CAR OPERATION
YES90.1%
NO9.9%
YES92.3%
NO7.7%
PERSONALLY USE COMPUTER(percentage of respondents)
* Annual Comparative Data Not Available
2007 2008 WHAT COMPUTER IS USED FOR
ENTIREOPERATION
INVENTORY F&I MKTG/ADV SALES OTHER
2008
52.9
18.2
8.14.4
9.112.1
INDEPENDENT FRANCHISE
2008
80.0
20.0
WARRANTY/SERVICE CONTRACTSSOLD PER MONTH
1-5 4-10 11-20 21-30 31+
2008
55.4
22.615.1
4.8
2.2
50%
40%
30%
20%
10%
0
50%
40%
30%
20%
10%
0
90%
80%
60%
40%
20%
0
S E C T I O N
ONE
*
*
*
*
S E C T I O N
TWO
Because usedvehicles are pur-chased more outof necessity thanemotion, the pre-owned market willlikely show a sig-nificant improve-
ment in overall sales this year.
Independent dealers, if they holdonto their share of the market vs.franchised dealers and privateparty sales, could see a millionmore used sales in 2009. In 2008,independent dealers sold nearly 11percent fewer vehicles than in2007.
Prices, which have begun firmingup late last year continued to do soin the first three months of 2009,should continue to improvethroughout the year. It won't bemuch, but at least the bottom seemsto have been reached and leftbehind.
The number of independent deal-ers, however, has taken a signifi-cant hit in the past year. More than4,000 Independent dealershipsclosed their doors bringing the totalto approximately 38,600 outlets.As the market improves this yearand into 2010, that number maywell reverse and climb slightly by2011.
NIADA members can obtain afree issue of Retail AutomotiveSummary which includes used-vehicle forecasts, email CNW atmailroom@cnwmr.com.
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T14
INDEPENDENTDEALERS
FRANCHISEDEALERS
CASUAL SALES
40%
30%
20%
10%
0
20072006 2008
2006 2007 2008
16
14
12
10
8
6
4
2
0
13.7 13.1
11.7
32.2 31.6 32.133.6
34.5
36.1
34.233.9
31.8
MARKET SHARE BREAKDOWN(in millions)
USED CAR INDUSTRYDATA FROM CNWMARKETING RESEARCHBY ART SPINELLA
The top selling used vehiclecontinues to be Ford’s F-Seriesfollowed by Cheverolet’s Silverado.
SALES VOLUME BY INDEPENDENT DEALERS(in millions)
F A C T S A N D S T A T I S T I C S O N T H E U S E D M O T O R V E H I C L E I N D U S T R Y
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T 15
TOP 10 SELLING USED VEHICLES(Franchised and Independent Dealers)
2006F Series 796,039Silverado 636,069Camry 417,104Ram pickup 364,177Accord 348,843Impala 289,868Civic 285,385Corolla 372,327Altima 323,457Cobalt 211,449
USED VEHICLE SALES BY SEGMENT(Franchised and Independent Dealers)
Category Example
Budget Car EchoEconomy Car SentraEntry-Level SUV LibertyEntry-Level Sport Wagon TucsonFull Size Pickup F-SeriesFull Size Van RamHybrid Vehicles PriusLuxury Car DeVilleLower Mid Range Car G6Lower Mid Range SUV AscenderLarge SUV ExcursionMid Range Sport Wagon PilotMini Van WindstarNear Luxury Car ES 330Premium Car 7 SeriesPremium Mid Range Car MaximaPremium Sporty Car CorvettePremium SUV NavigatorPremium Sport Wagon M ClassStandard Mid Range Car Grand PrixSmall Pickup FrontierSport Utility Pickup AvalancheTouring Car MustangTraditional Car AvalonUltra Upscale Car MaybachUltra Luxury Sporty Car FerrariUpper Mid Range SUV EnvoyUpper Premium Sporty Car SC 430
2007Sales
588,1443,719,387
844,9392,137,1986,747,084
646,13037,277
646,1303,781,5152,866,1641,151,436
720,6833,284,4921,578,047
78,6951,085,166
252,653397,618807,662
4,982,6532,327,723
385,193563,292
1,155,5784,142
12,426563,29253,844
2008Sales
630,5153,558,061
686,7722,261,2326,184,597
442,01858,449
591,7933,200,0632,487,7211,037,463
679,4662,747,0861,187,238
47,4901,000,933
208,223357,998752,526
4,442,0971,727,888
332,427445,671865,771
2,9229,498
540,65043,836
2007 2008
USED VEHICLE SALES - FINANCED VS. CASH(Independent Dealers)
16
14
12
10
8
6
4
2
0
12,997,464
54.2%(Financed)
45.8%(Cash)
11,741,997
44.1%(Financed)
55.9%(Cash)
2007 2008
USED VEHICLE SALES - FINANCED VS. CASH(Franchised Dealers)
16
14
12
10
8
6
4
2
0
61.7%(Financed)
38.3%(Cash)
55.6%(Financed)
44.5%(Cash)
13,171,89214,284,454
2008F Series 1,358,931Silverado 1,165,320Camry 931,525Civic 916,913Corolla/Matrix 814,628Accord 800,016Ram pickup 756,179Focus 653,894Impala 569,874Altima 471,242
2007F Series 702,619Silverado 697,223Camry 592,413Accord 418,738Corolla/Matrix 382,528Civic 381,425Ram pickup 364,213Impala 214,717Tundra 183,448Caravan/Grand Caravan 182,282
NOTE: private party excluded
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T16
ADVERTISING EXPENSES($ per vehicle)
2007 20082005
$80K
$60K
$40K
$20K
02006
AVERAGE PRICE OF USED VEHICLES SOLDBY INDEPENDENT DEALERS
2007 20082005
$10K
$7.5K
$5K
$2.5K
0
$8,492
NUMBER OF INDEPENDENT DEALERS IN THE U.S.
2007 20082005
60K
40K
20K
0
USED VEHICLE SALES BY INDEPENDENT DEALERS
Units in Average Valuemillions price
2004 14.75 $8,490 $124.9
2005 14.21 $8,545 $121.4
2006 14.36 $8,492 $121.9
2007 14.35 $8,650 $124.1
2008 14.38 $8,750 $125.8
NEW AND USED VEHICLE SALES(in millions)
New vehicles Used vehicles Total sales
2004 16.84 42.70 59.54
2005 17.00 44.14 61.13
2006 16.54 42.56 59.11
2007 16.22 41.75 57.80
2008 13.30 36.50 49.80
2006
$8,545
38,66242,79144,321
2006
44,702
INDEPENDENT DEALERS TOTAL MARKET SHARE
Ind. MarketYear Total Volume Ind. Volume Percentage
2004 42.7 million 14.8 million 34.5
2005 44.1 million 14.2 million 32.2
2006 42.5 million 13.7 million 32.2
2007 41.4 million 13.0 million 31.6
2008 36.5 million 11.7 million 32.1
RENT AND EQUIVALENT($ per vehicle)
2007 20082005
$100k
$75k
$50k
$25k
0
2006
$66,269$78,144
$264per vehicle
$234per vehicle
$76,507
$253per vehicle
$79,328
$268per vehicle
$113,072$94,589
$382per vehicle
$334per vehicle
$115,214
$381per vehicle
$111,888
$378per vehicle
$8,281$7,893
S E C T I O N
TWO
S E C T I O N
TWO
PURCHASE OF EXTENDED WARRANTIESFOR USED CARS - 2 0 0 8(percentage of respondents)
JAN
TOTAL USED VEHICLE SALES PER MONTH(in millions, independent and franchise dealers)
TOTAL SALES 2007: 41.4TOTAL SALES 2008: 36.5
5
4
3
2
1
0
2.071.98
20082007
DEC TOTALFEB MAR APR MAY JUN JUL AUG SEP OCT NOV
20082007USED VEHICLE SALES PER MONTH, PER OUTLET - INDEPENDENT DEALERS (in millions)For example, in January 2008, independent dealers sold 636,998 vehicles from 42,864 locations.That results in 14.9 units per outlet.
14.1
7.1
12.6
4.25.3
1.22.7
1.2
20
15
10
5
0
FRANCHISED DEALERS
INDEPENDENT DEALERS
2.2
NEW 2-4 YEAROLD
5-7 YEAROLD
8-10 YEAROLD
OVER 10YEARS
PURCHASE OF EXTENDED WARRANTIESFOR USED CARS - 2 0 0 7(percentage of respondents)
0.0
16.4
7.9
15.3
4.77.1
1.63.3
1.6
20
15
10
5
0
FRANCHISED DEALERS
INDEPENDENT DEALERS
2.4
NEW 2-4 YEAROLD
5-7 YEAROLD
8-10 YEAROLD
OVER 10YEARS
1.79 1.68
2.572.77
3.313.71
3.904.19
4.764.39
3.75
4.30
3.864.12
3.61
4.51
2.31
2.972.50
3.162.61
3.05
36.541.4
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T18
JAN
35
28
21
14
7
0
14.8 14.9
DECFEB MAR APR MAY JUN JUL AUG SEP OCT NOV
12.3 12.4
18.620.1
24.727.1 27.930.6
35.734.6
28.733.0
29.830.629.1
32.0
18.220.9 20.8
23.121.722.2
F A C T S A N D S T A T I S T I C S O N T H E U S E D M O T O R V E H I C L E I N D U S T R Y
UNITS SOLDTHROUGH INTERNET
UNITS OFFEREDON INTERNET
INTERNET USED VEHICLE SALES(in millions)
50
40
30
20
10
0
48.7
39.1
7.77.9
2007 2008
2007
USED VEHICLE INVENTORY DAYS’ SUPPLY(In days)
100
80
60
40
20
0
70.5SEPT
2005 2006
79.5JAN 69.9
NOV
2007
SEPT
2005 2006
AUG
56.3SEPT
Total Independent Ind. Volume
Vehicle Age Volume Volume Percentage
1 yr
2 yr
3 yr
4 yr
5 yr
6 yr
7 yr
8 yr
9 yr
10 yr
11 yr
12 yr
13 yr
14 yr
15 yr
16 yr
17 yr
18 yr
19 yr
20 yr
Totals
3,487
7,967
35,551
154,348
661,688
1,046,988
2,304,910
2,164,315
2,001,100
1,049,574
580,741
286,912
216,802
183,112
211,761
196,902
147,382
150,252
143,881
194,156
11,741,830
405,487
705,037
1,439,298
2,670,373
3,755,326
4,303,282
6,148,067
4,737,993
3,821,080
2,597,312
1,501,400
814,628
529,691
416,447
489,507
467,589
376,263
390,875
390,875
569,874
36,530,404
0.9%
1.1%
2.5%
5.8%
17.6%
24.3%
37.5%
45.7%
52.4%
40.4%
38.7%
35.2%
40.9%
44.0%
43.3%
42.1%
39.2%
38.4%
36.8%
34.1%
32.1%
HIGH LOW
2007 2008
AVERAGE INDEPENDENT DEALERSASKING PRICE VS.TRANSACTION PRICE
9.5K
9K
8.5K
8K
7.5K
7K
6.5K
6K
5.5K
$8,603
$7,813
$9,071
$8,281
ASKING PRICE TRANSACTION PRICE
USED VEHICLE ADVERTISING DISTRIBUTION -INDEPENDENT DEALERS WHO ADVERTISE
(Listed by percentage of money used for particular type of advertising;note that many dealers advertised more than one way, so percentageswon't necessarily add to 100)
Category 2005 2006 2007 2008
Classified Ads 92.3 90.6 89.6 89.1%
Radio 1.4 1.3 1.2 1.1%
Television 0.5 0.6 .8 0.6%
Internet 19.9 20.8 22.1 23.4%
VEHICLE AGE BREAKDOWN AND INDEPENDENTDEALERS MARKET SHARE - 2008(Excludes wholesale)
46.350.8
2008
61.73APRIL
2008
86.36NOV
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T 19
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T20
This profile includes all active dealerships with an actual place of businessand multiple sales of the same vehicle (post repossession, etc.)
INDEPENDENT USED VEHICLE DEALER PROFILE
Source: CNW Marketing Research, Inc.
TOTAL SALES(All departments)
2007 20082005
$5M
$4M
$3M
$2M
$1M2006
$4,952,537
TOTAL GROSS(As percent of total sales per independent dealer)
$1,000K
$750K
$500K
$250K
0
TOTAL EXPENSES(As percent of total sales per independent dealer)
2007 2008
NUMBER OF VEHICLES SOLD(Average per year per independent dealer)
2007 20082005
400
300
200
100
02006
290.6
NET PROFIT BEFORE TAXES(As percent of total sales per independent dealer)
$300K
$250K
$200K
$150K
$100K
$50K
$3K
$2K
$1K
$0K
12.62
$811,721
16.39% $501,36914.29
$645,797
18.84%
$94,45820.31%
$131,161
(1.56%)
$1,147
(Averages per independent dealer)
16.16%
$774,454
2005 2006 2007 2008
This profile includes all active dealerships with an actual place of businessand multiple sales of the same vehicle (post repossession, etc.)
$4,792,416
$3,972,812
$4,519,223
283.2302.4307.5
2007 2008
REDUCTION OFREPOSSESSIONS
REDUCTION OFLATE PAYMENT
PAYMENT PROTECTION DEVICES - REDUCINGLATE PAYMENT AND REPOSSESSIONS(dealers with devices)
80
60
40
20
0
63.9264.2
37.2439.6
20082007
(1.82%)
$2,387
Independent dealers,if they hold onto theirshare of the market vs.franchised dealersand private partysales, could see amillion more usedsales in 2009.
S E C T I O N
TWO
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T22
USED VEHICLE SALES - BY CREDIT TYPE(Independent dealers - dollars in billions)
A PAPER 19.41% $23.57 19.23% $23.45 19.10% $23.71
B PAPER 19.68% $23.90 19.43% $23.69 19.26% $23.91
C PAPER 34.47% $41.85 35.06% $42.76 34.83% $43.236
D PAPER 26.44% $32.10 26.28% $32.05 26.81% $33.28
TOTALS $121.42 $121.95 $124.13
USED VEHICLE SALES(As percent of total sales)
2007 20082005
$2.5M
$2M
$1.5M
$1M
02006
F&I INCOME(As percent of total sales)
2007 20082005
$1.4M
$1.3M
$1.2M
$1.1M
$1M
2006
FLOOR PLAN INTEREST($ per vehicle)
$35K
$30K
$25K
$20K
$15K
SERVICE AND PARTS(As percent of total sales)
2007 20082005
$1.4M
$1.3M
$1.2M
$1.1M
$1M2006
OTHER INCOME(As percent of total sales)
2007 20082005
$250K
$200K
$150K
$100K
$75K2006
RETAIL GROSS PROFIT(Percent of retail selling price)
$550
$500
$450
$400
$350
$300
2005 2006 2007 2008
42.71%41.92%
$2,058,401$1,894,458
37.17%
$1,476,694
25.61%26.91%
$1,234,269$1,216,123
27.62%$1,097,291
$35,986$119
per vehicle
$37,382
$132per vehicle
28.15%
28.35%
$1,356,684
$1,281,200
29.45%
$1,169,99342.56%
$2,051,172
26.32%
$1,268,488
$34,928
$118per vehicle
$109per vehicle
28.04%$1,351,383
3.53%
2.82%$127,442
5.76%$228,834
3.08%$148,440
5.92%
5.23%
$505.86
$433.10
4.07%$321.25
5.71%
$484.89
$170,128
$35,264
2007 20082005 2006 2007 20082005 2006
20.51% $25.81
42.77% $53.82
20.44% $25.72
16.28% $20.49
$125.84
S E C T I O N
TWO
Annually NABD,with the help ofShilson, Goldberg& Cheung, CPAs,compiles buy here,pay here financialbenchmarks from adatabase of more
than 500 operators nationwide.These financial benchmarks are acomposite of the best performingoperators and are not an average ofthe entire database. Since 2006,the NABD benchmarks also includeoperating information on sales,collections and recoveries, andinventory management which weredeveloped and supplied by NCMTwenty Groups, based upon a com-posite of all of their BHPH 20group members. The attachedNABD benchmarks also includeportfolio performance metricswhich were compiled electronical-ly by Subprime Analytics, which,to date, has analyzed more than $5billion (more than 600,000 individ-ual accounts) of subprime, BHPHinstallment loans to identify lossrates, patterns and trends. In theaggregate, these statistics providea comprehensive look at thefinancial and operating perfor-mance of the BHPH Industry forthe last three years and someinteresting trend information forearlier periods.
The automotive industry had avery difficult year in 2008. Acredit crisis, volatile gas prices,both inflation and deflation, andother economic factors combinedto create some unprecedented eco-nomic challenges for both new andused car dealers. While franchisesales and profits declined, theattached benchmarks show thatBHPH profits did not experiencethe same fate at least among thebetter operators.
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T24
2008 2007 2006
Sales 100% 100% 100%Cost of vehicle sales (60%) (63%) (64%)Subtotal 40% 37% 36%
Financing Income 18% 16% 18%Bad Debts (21%) (19%) (20%)Gross Profit 37% 34% 34%
BUY HERE, PAY HERE INDUSTRY BENCHMARKS / TRENDS 2008
GROSS PROFIT COMPARISON: 2006 – 2008
The table below compares the resultant changes in gross profit from2006 – 2008 (The numbers below are compiled from our bestperforming dealers and are not industry averages.):
Note: All percentages are expressed as a percentage of total revenues.
As noted in the summary above, gross profit in 2008 was slightly highercompared with 2007! A more careful look at these results providessome important trends that need to be discussed!
• Financing charges for 2006 through 2008 (even for the best operators)was not sufficient to offset bad debt losses.
• Higher “cash in deal” makes good underwriting essential incontrolling losses.
Source: NABD / Subprime Analytics
AVERAGE CUSTOMER DOWN PAYMENT: 2004 – 2008
2004
$1,000
$800
$600
$400
$2,00
$0
$1,066
2005
$837
2006
$900
2007
$1,018
2008
$1,089
BUY HERE, PAY HEREINDUSTRY BENCHMARKS
BY KENNETH SHILSON
S E C T I O N
THREE
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T 25
$85
$83
$81
$79
$77
$75
$73
$71
$69
$67
$652005
$78
2006
$79
2007
$85
2008
$84
BHPH FINANCIAL TRENDS AVERAGE WEEKLYPAYMENT AMOUNT 2005-2008
Source: NABD (for 2003-2005) NCM (for 2006)
F A C T S A N D S T A T I S T I C S O N T H E U S E D M O T O R V E H I C L E I N D U S T R Y
LOSS STATISTICS - 2007(Statistics supplied by Subprime Analytics)
2008 2007Subprime Analytics Subprime Analytics
Benchmarks Benchmarks
Average gross dollar loss (before recoveries) $6,887 $6,753Average net dollar loss (after recoveries) $5,157 $4,693Average default rate (% of loans written off) 28.43% 27.71%Average gross dollar loss rate (% of principal) 35.54% 37.32%Average net dollar loss rate (% of principal) 24.76% 24.83%Average recovery (% of principal charged off) 28.00% 30.60%Highest cumulative default month after origination 19th Month 17th MonthHighest frequency of default (month after origination) 4th Month 4th MonthWorst periodic loss month after origination February January
The above referenced loss data was determined by electronically analyzing approximately 613,000 loans, aggregating approximately $5.3 billion to identify loss ratesand to understand why they occurred.
Source: NABD
BHPH FINANCIAL TRENDS2002-2008 BAD DEBTS
20%
15%
10%
5%
0%2002
17%
2003
16%
2004
17%
2005
19%
2006
20%
2007
19%
2008
21%
% OF SALESCOST OF GOODS SOLD AND OPERATING EXPENSE DETAILBuy-Here, Pay-Here Industry Benchmarks Prepared for NABD byShilson, Goldberg, Cheung and Associates. LLP
According to the research, Buy-Here,Pay-Here dealers spent less moneyin 2008 on reconditioning vehiclesand spent less for the vehiclesthemselves than they did in 2007.
2008 % OFVEHICLE
SALES
2007 % OFVEHICLE
SALES
2006 % OFVEHICLE
SALES
TOTAL COST OF VEHICLE SALES 59.67% 62.59% 63.50%
TOTAL OPERATING EXPENSE 21.35% 18.62% 18.34%
C O S T O F V E H I C L E S A L E S
C O S T O F V E H I C L E S A L E S
Cost of vehicles 51.03% 54.34% 55.26%Reconditioning costs 4.12% 4.97% 5.38%Other 4.52% 3.28% 2.86%
Advertising 1.55% 1.21% 1.45%Bank charges 0.24% 0.07% 0.12%Contributions 0.01% 0.03% 0.38%Depreciation 0.54% .82% 0.77%Dues and Subscriptions 0.02% 0.02% 0.03%Insurance 0.99% 0.23% 0.72%Legal and accounting 0.50% .71% 0.43%Outside services 0.30% 0.07% 0.35%Office expense 1.31% 0.89% 1.10%Rent 1.62% 1.13% 1.46%Repairs and maintenance 0.27% 0.44% 0.25%Salaries (non-owners) 10.81% 9.97% 8.85%Taxes - general 0.30% 0.26% 0.15%Other Operating Expense 0.60% 0.83% 0.67%Taxes - payroll 1.11% 0.83% 0.78%Utilities andTelephone 0.79% 0.64% 0.63%Travel /Training 0.38% 0.47% 0.20%
F A C T S A N D S T A T I S T I C S O N T H E U S E D M O T O R V E H I C L E I N D U S T R Y
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T26
2008 DEALER OPERATING INFORMATIONStatistics supplied by NCM Associates, Inc.Associates. LLP 2 0 0 8 2 0 0 7
NCM NCMS A L E S Benchmarks BenchmarksAverage units sold per dealer (BHPH deals only) 743 879Average cash in deal per vehicle sold $4,696 $4,645Average ACV per vehicle sold (includes recon) $5,284 $5,111Average reconditioning cost per vehicle sold $499 $634Average gross per vehicle sold $4,239 $4,123Average cash down payment $1,185 $1,084Average amount financed $9,195 $9,085Average term of loan (in weeks) 129 134
C O L L E C T I O N S / R E C O V E R I E SAverage weekly payment amount $84 $85Average # of accounts past due 350 384Average # of past due accounts per collector 101 78Average loss per charge off $5,264 $4,927Average portfolio delinquency
Current 69.85% 74.80%0-10 days 11.75% 10.10%11-29 days 10.20% 7.60%30-59 days 4.60% 3.50%60-89 days 1.50% 1.50%90+ days 2.10% 2.50%
100.00% 100.00%
I N V E N T O R Y M A N A G E M E N TAverage number of units in stock 169 201Average inventory aging
0-30 days 32.10% 42.60%31-60 days 22.40% 24.30%61-90 days 17.10% 13.10%91+ days 28.40% 20.00%
100.00% 100.00%
Average total avg per vehicle sold(including recon)
AVERAGE TOTAL ACTUAL COSTPER VEHICLE SOLD 2005-2008
$6,000
$5,000
$4,000
$3,000
$2,000
$02005
$4,906
2006
$4,949
2007 2008
$5,111$5,284
Average cash in deal per unit sold
BHPH FINANCIAL TRENDS AVERAGE“CASH IN DEAL” 2005-2008
$5,000
$4,500
$4,000
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$02005
$4,563
2006
$4,480
2007
$4,645
2008
$4,69670%
60%
50%
40%
30%
20%
10%
0%
BHPH FINANCIAL TRENDS 2002-2008COSTS/EXPENSES
2002
63%
21%
2003
59%
21%
2004
62%
22%
2005
64%
18%
2006
64%
18%
2007 2008
63%
19%
60%
21%
COST OF VEHICLES OPERATING EXPENSES
Source: Shilson, Goldberg, Cheung & Associates, LLPSource: NABD/NCM Source: NABD/NCM
S E C T I O N
THREE
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T 27
RATIO COMPARISONSBuy-Here, Pay-Here Industry Benchmarks Prepared for NABD by Shilson, Goldberg, Cheung and Associates. LLP
The NABD results - combined dealer and finance affiliate numbers - break down balance sheets and income statements into 16 categories. It also compares 2008 to 2007 sodealers can examine industry trends.
RATIO COMPARISONS, COMBINED BUY-HERE, PAY-HERE
COMBINED BUY-HERE, PAY-HERE
Balance Sheet 2008 Avg. 2007 Avg. 2006 Avg.(Inventory x Days) / Cost of Vehicle Sales 68.57 days 56.21 days 55.03 daysCost of Vehicle Sales /Average Inventory Dollars 5.96 x 8.51 x 9.22 xVehicle Sales / Average Inventory Dollars 9.98 x 13.59 x 14.51 xVehicle Sales / Total Assets .96 x 1.27 x 1.18 xTotal Assets / Total Liabilities 1.61 x 1.82 x 2.01 xAllowance for Bad Debts / Finance Receivables* 18% 14% 16%Finance Receivables* / Total Assets 89% 85% 87%Total Debt / Total Assets 62% 55% 50%* Finance receivables are net of finance charges
Bad Debts / Vehicle Sales 21% 19% 20%Cost of Vehicle Sales / Vehicle Sales 60% 63% 64%Gross Profit*** / Vehicle Sales 37% 34% 34%Operating Expense / Vehicle Sales 21% 19% 18%Interest Expense / Financing Income 23% 20% 17%Operating Income / Vehicle Sales 16% 15% 16%Financing Income / Vehicle Sales 18% 16% 18%Compensation** / Vehicle Sales 11% 10% 9%Reconditioning Cost / Vehicle Sales 4% 5% 5%NOTES TO RATIO COMPARISONS:**Compensation excludes those of the owners***Gross Profit is net of bad debts and financing incomex = times
F A C T S A N D S T A T I S T I C S O N T H E U S E D M O T O R V E H I C L E I N D U S T R YF A C T S A N D S T A T I S T I C S O N T H E U S E D M O T O R V E H I C L E I N D U S T R Y
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T28
WALK-IN TRAFFIC SURVEY
BY AUTO TRADER AND NORTHWOOD
Dealers invest heavily in print and broadcast advertising toattract their customers but a Northwood University-AutoTrader.com study of consumers shows their interest is piquedby Internet research and web pages. The study reported theInternet drives more than four times as much walk-in traffic asthe newspaper, nearly seven times as much as TV, and 13 ½times that of radio.
Morpace Inc., a leading independent research company, con-ducted the Dealer Walk-In Traffic Study during the last half of2008. Researchers visited 59 franchise and independent deal-ers in 17 markets, surveying 573 shoppers on dealer lots aboutwhat factors led them to a specific showroom. The dealershipsrepresented a broad spectrum of foreign and domestic brandsincluding luxury, economy, and other brand segments andwere selected randomly with no insight into how the dealer-ships marketed their businesses. All people interviewed forthe study were screened to include only those specifically onthe lot to shop for a car.
The first-of-its-kind study of car shoppers showed 80% of carshoppers walked onto auto dealers’ lots without calling oremailing the dealership first, meaning many auto dealers judg-ing the success of their advertising primarily by the number ofemail leads or phone calls are underestimating the amount ofwalk-in traffic and potentially misdirecting marketing dollarsaimed at reaching these customers.
Northwood University said the results provided clear evidencethat unannounced walk-in traffic is more prominent than mostin the industry believe, that Internet advertising drives a sig-nificant portion of dealer walk-in traffic and that the Internetserves as much more than a lead-generation device for show-rooms.
Overall, advertising served as the No. 2 driving force behind aconsumer’s decision to shop at a particular store, with only"drive bys" – the physical locationof the dealership – ranking ahead.Among advertising media, includ-ing the Internet, magazines, televi-sion, radio, direct mail and thephone book, 54% of all respon-dents cited the Internet as theprimary media source leadingthem to a particular dealer-ship.
Of those customers who foundthe dealership through theInternet, 61% walked in withoutotherwise contacting the dealer-ship prior to their initial visit,25% called before walking inand only 14% emailed before walk-ing in.
Specific Objectives
• Determine how walk-in traffic initially establishescontact with dealerships (i.e., phone, e-mail or walk-in).
• Measure the impact that all forms of advertising have ondealer walk-in traffic.
THE FOCAL POINT QUESTION OF THE SURVEY
What was the primary source that led you to visit thisdealership today?
STATE OF THE INDUSTRY-CURRENT OBSERVATIONS
STUDY OBJECTIVES
S E C T I O N
FOUR
• Since the advent of the Internet, manufacturers anddealers continue to seek the most effective and efficientmedia strategy.
• Traditional media continues to garner a large share ofadvertising spend.
• Automotive advertisers often treat the Internet as alead-generator and define its impact based on e-mailsand phone calls alone.
WHERE DID WE CONDUCT THIS STUDY?
• 59 dealerships (mix of manufacturers, independent andfranchise, luxury and non-luxury)
• 17 markets
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T 29
Primary Source Leading to Dealership
DEALER ADVERTISING SPEND
PRIMARY MEDIA SOURCE LEADING TO DEALERSHIP
DEALERS’ PERCEPTION
REALITY
Source: 2008 Dealer Brand Image Study & Dealer Walk-In Study
WHAT ARE THE PRIMARY SOURCES THAT DRIVE DEALERWALK-IN TRAFFIC?
DRIVING BY ADVERTISING PRIOREXPERIENCE
FRIENDS ORFAMILY
20%22%27%
31%
50%
40%
30%
20%
10%
0
Advertisingdrives overone-fourthof dealerwalk-intraffic
Source: 2008 Dealer Walk-In Study
54%
17% 13%
27%
8%
17%
4%
17%
3%10%
60%
40%
20%
0
Source: 2008 Dealer Walk-In Study & NADA Data 2008 Report.
INTERNET NEWSPAPER RADIOTELEVISION DIRECTMARKETING
3%
STATE OF THE INDUSTRY - CURRENT OBSERVATIONSYet, e-mail leads have stagnated over the last several years.
20%
64 % 67%
21%
68%
21%
71%
22%
75%80%
60%
40%
20%
0%
ONLINE NEW CAR SHOPPER AS % OF TOTAL BUYERSEMAIL LEAD REQUESTORS AS % OF TOTAL BUYERS
DEALERS’ PERCEPTIONREALITY
22%
2004 2005 2006 2007 2008
Source: JD Power 2004-2008 New AutoShopper.com Study
Source: 2008 Dealer Walk-In Study & NADA Data 2008 Report.
WHAT ADVERTISING DRIVES DEALER WALK-IN TRAFFIC?The Internet is the number one media source driving dealer walk-in traffic.More than half of all walk-in traffic generated by advertising can be attributedto the Internet.
Of the 54% brought to the dealership by the Internet, 61% do not contact thedealership first.
INTERNET NEWSPAPERS
80%
60%
40%
20%
0CLASSIFIEDMAGASINES
RADIO TELEVISION DIRECTMAIL
OUTDOORADVERTISING
PHONEBOOK
54%
32%
13%
27%
15%11%4%
8%8% 7%0%
6% 3%0%
9%
IT’S IMPORTANT TO INVEST IN EFFICIENT ANDEFFECTIVE MEDIA.The Internet is the number one media source at driving walk-in traffic. However,dealers are still spending heavily on more traditional media such as Newspaper,Radio and TV.
WALK-IN61%
WALK-IN80%
WALK-IN41%
PHONE42% PHONE
25%
EMAIL2%
PHONE17%
EMAIL14%
HOW DO WALK-INS ESTABLISH CONTACT WITH THE DEALER?80% of car shoppers who walk through a dealership’s doors do not establishcontact with the dealer prior to their initial visit.
EMAIL17%
F A C T S A N D S T A T I S T I C S O N T H E U S E D M O T O R V E H I C L E I N D U S T R Y
2 0 0 9 N I A D A U S E D C A R I N D U S T R Y R E P O R T30
S E C T I O N
FIVE
ADAPTING TO A CHANGING MARKETPLACE
In 2008, many independent dealers remained profitabledespite facing one of the most challenging operatingenvironments ever. As always, the key to success wascorrectly valuing and then quickly turning inventoryacquisitions.
Although national attention was rightly focused onthe economy as a whole in 2008, independent dealerscontinued to perfect ways to become more efficient in
both buying and selling at wholesale. As a result, the use of online saleschannels accelerated at a record pace, foretelling a significant and lastingshift in the wholesale used car marketplace – one where online and in-laneremarketing become seamlessly integrated.
The numbers were staggering. At the end of 2008, even in the face ofvery weak wholesale market, Manheim.com was receiving more than800,000 visits every week. Half of all Manheim dealer customers havenow purchased a vehicle online and the total sales volume on OVE.comdoubled in 2008. Those numbers represent more than our success. Theyrepresent the success of all those dealers who have achieved efficienciesin operations and adapted to a changing marketplace.
In 2009, the benefits of the efficiencies that dealers achieved in 2008should increasingly flow to the bottom line. That’s because, although stillweak, the overall economy now has spots of strength, as well as signs ofstabilization, whereas last year there was only weakness and turmoil.
As is typical, the used vehicle market improved before any signs of aturnaround in the new vehicle market. In the first quarter of 2009, usedvehicle retail sales by dealers were basically flat with year-ago levels,while new vehicles sales were down nearly 40 percent. This divergence inperformance boosted wholesale used vehicle pricing as the lack of trade-ins on new vehicle sales significantly reduced this source of supply intothe wholesale market.
In addition to being inherently more stable than the new vehicle mar-ket, used vehicle retail activity in early 2009 was helped by a strong taxrefund season. In its first release of data, the IRS indicated that individualincome tax refunds were up more than 12 percent to $154 billion as of thefirst week of March. This rise was the result of the higher standard deduc-tion and an increase in the maximum earned income tax credit – two pro-visions that are particularly important to the used vehicle market.
For the remainder of 2009, independent dealers should anticipate con-tinued softness in the overall economy and a weak labor market – both ofwhich will make customers value-conscious and credit-sensitive. Withrespect to wholesale supply, dealers should benefit from a higher numberof attractively-contented end-of-service fleet vehicles entering the market.Some fleets will be cycling their fleets early – sometimes for good reasons(attractive deals on ’10 models) and sometimes for sad reasons (workforcereductions).
At Manheim Consulting, we wish all dealers continued success overthe coming year and we will be closely watching and analyzing thetrends as the year unfolds. Contact me at Thomas.webb@manheim.comany time if we can be of service, and check out our website atwww.manheimconsulting.com.
In December, the National Bureau ofEconomic Research officially declared that theU.S. economy was in a recession that startedin December 2007.Unemployment rose to 7.2%, during 2008,
plants shut, consumer spending and businessinvestment dropped. The credit crunch helpedconsumer saving and debt levels, but at the
cost of reduced personal consumption expenditures.Additionally,the housing market continued its stagnation.
Our hope for a better second half is based on a continuedthaw of the credit freeze as monetary policy focusing on lowrates, increased liquidity and interventions to absorb risk takesfurther hold, and as fiscal stimulus moves beyond politics andinto the real economy.
New vehicle sales were the lowest they’ve been since 1992and retail used vehicle sales continued a slide that started severalyears ago. New vehicle inventory levels are high and theyremain relatively affordable as pent-up demand seems to bebuilding. Used vehicles may benefit from pent-up demand, andfrom the tendency of consumers to buy used vehicles duringtough times. Certified pre-owned vehicles may be a particularlyattractive alternative to such consumers today.
On the supply side, the used vehicle market saw growth in vol-umes from off-lease units and repos in 2008 which should contin-ue through 2009. For dealers seeking to increase their used vehi-cle sales, lack of trade-in volume has drawn them increasingly toauctions. This helped wholesale prices stabilize after 12 months ofyear-over-year declines. Declines in rental sales also have sup-ported wholesale prices. Another stabilizing factor is the reset toSUV and pickup truck prices after an over-correction due to highgas prices.
Wholesale used vehicle prices began to firm up in late 2008and by springtime, prices had climbed for five consecutivemonths. On a year-over-year basis, prices were still modestlyunder water, but the level of submersion diminished to almostnegligible levels. Although all seller types, model class segments,and vehicle ages experienced month-over-month price gains, thestrength of the overall increase by March was partially deter-mined by robust prices for the youngest, most expensive vehiclespurchased in manufacturer auctions by franchised dealers. Thisreflects supply shortages of late-model used vehicles resultingfrom diminished rental unit sales in recent years, and renewedinterest on the part of franchised dealers to generate grosses byselling more late-model used vehicles.
Remarketers who have flexibility in the timing of auctioningtheir vehicles would do well to take advantage of the current sell-er’s market. With consumers, and hence dealers, actively seekingused vehicles in these tough economic times, demand, as well assupply, conditions remain favorable for wholesale prices to contin-ue to firm.
By Tom Webb, Manheim Consulting Chief Economist
USED VEHICLES IN TOUGH ECONOMIC TIMES
By Tom Kontos, Executive Vice President, Customer Strategies and Analytics, ADESA
AUCTION / REMARKETING COMMENTARYBY TOM WEBB AND TOM KONTOS
S E C T I O N
SIX
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