Auctions

Kontos’ 4-point assessment of Harvey fallout

CARMEL, Ind. - 

KAR Auction Services chief economist Tom Kontos spent the past few days poring over data and information that he’s encountered in connection with Hurricane Harvey; a storm meteorologists are calling a 1,000-year flood event.

Kontos explained in a special edition of the Kontos Kommentary there are four primary considerations for the automotive industry to understand as gasoline prices climb and the full macroeconomic impact likely taking months to unfold.

Kontos began with looking at total loss units versus damaged vehicles.

“Historically, we know that many of the vehicles damaged in a hurricane are not total losses. For example, in 2012’s Hurricane Sandy, of the 250,000 vehicles damaged only about 160,000 were total losses,” Kontos said.

“For the non-flood damaged vehicles, a total loss is only declared if the cost of repairs exceeds a certain threshold versus the vehicle’s value. So the same storm damage — dents, scratches, shattered glass — on one vehicle may be a total loss, but not on another, depending on their relative values,” he went on to say.

As KAR chairman and chief executive officer Jim Hallett referenced during an earlier conversation with AuSM, Kontos reiterated that commercial consigners — including the company’s rental, fleet and captive finance customers — are coordinating with KAR to push more units toward Houston and the Gulf region.

Both Hallett and Kontos emphasized that the 13 ADESA auctions in the area are operational and well-positioned to take on this additional inventory.

“But keep in mind, sellers don’t necessarily have to move inventory into the market pre-sale,” Kontos said. “As we’ve seen over the past few years, the volume of vehicles sold at online auctions is growing.

“Our online capabilities can match buyers with sellers and help them find the specific car or cars they are seeking — and then transport them after the sale,” he continued. “And our analytical capabilities can help advise remarketers on the economic desirability of moving inventory versus selling online.”

Next, Kontos touched on what he’s heard from the client roster held by Insurance Auto Auctions. He explained many insured individuals receive checks for the actual cash value, or the current value, of their vehicle — not the cost of a new model.

“As a result, we anticipate an uptick in demand for quality used cars once claims begin to be paid,” Kontos said. “Timing is an important factor here, given the current oversupply of used vehicles stemming from a surge of off-lease units hitting the market.

“While the number of total loss units is still unknown, IAA expects that number to be significant, and could help mitigate some of the downward pressure on used vehicle values by helping absorb this oversupply,” he continued.

Furthermore, Kontos mentioned the regional dynamics likely in play as Houston and the surrounding areas in Texas and Louisiana try to bounce back from Harvey.

“At the micro-level, trucks are very popular in Texas and have resisted the price softening we’ve seen with cars,” Kontos said. “Trucks are holding value better, in part, because gas prices have been low and the supply has been tighter compared to cars.

“The net impact is there will be an increased demand in this region for trucks and SUVs as people seek to replace their total loss trucks and SUVs. Compared to cars, sellers may find more price justification to move truck inventory to Texas,” he went on to say.

Kontos closed with a message to dealers, especially franchised operations that saw vehicles submerged by Harvey’s record rainfall.

“For Houston-area franchise dealers trying to replace damaged inventory, obtaining used car inventory at a time like this may be their best immediate option and value,” Kontos said. “Floor-planning quality used cars is more affordable than new cars, and the current oversupply of off-lease used vehicles means these vehicles are quickly and readily obtainable.

“And a stable of quality used cars will ready-match dealer supply to demand as consumers seek to affordably replace their total loss vehicles,” he continued.

“In summary, Hurricane Harvey is a devastating event for which the whole-car and salvage auction industry stands ready to respond through efficient vehicle disposal and replacement with an abundance of supply,” Kontos concluded.


4 Manheim locations in Florida to close Friday as Irma nears

CARY, N.C. - 

With Hurricane Irma remaining a dangerous storm, Manheim regional vice president for the Southeast Mark Ford shared an update on Wednesday afternoon regarding how the company plans to handle the storm projected to impact Florida as early as Friday.

Ford indicated the following Manheim locations in Florida will be closed on Friday, including:

Manheim Fort Lauderdale
Manheim Fort Myers
Manheim Palm Beach
Manheim Lakeland

Ford added that Manheim Caribbean also will be closed until further notice.

“During severe weather conditions such as Hurricane Irma, Manheim proactively plans and prepares to protect the safety of our team members, clients and locations,” Ford said in a statement sent to AuSM. “This includes encouraging clients to retrieve their purchased vehicles at our locations prior to Friday to avoid any possible damage and moving physical sales to digital channels such as OVE for safety reasons.

“We are proactively communicating with our clients about the status of our operations and their vehicles and are helping to direct them to other Manheim digital channels for their vehicle needs,” Ford continued.

In addition, in preparation for any possible disaster relief needs for Manheim team members in the areas affected by Hurricane Irma, Ford indicated the human resources team at Cox Automotive will share relief resources and information.

As a division of Cox Enterprises, Manheim team members have access to the Cox Employee Relief Fund (CERF) should the need arise.

“Our CERF team in Atlanta is always on standby with immediate assistance for all Manheim team members as needed,” Ford said. “CERF is a 501(c)(3) charitable organization funded by donations from Cox team members to provide financial assistance to team members with unexpected needs resulting from a disaster.”

Advisories from the National Hurricane Center distributed on Wednesday said that remained a dangerous Category 5 storm with maximum sustained winds at 185 mph. Irma raged through the Caribbean on Wednesday, impacting the U.S. Virgin Islands as well as Puerto Rico with places like Cuba in the storm’s path before it possibly makes landfall in the Sunshine State sometime this weekend.

“As Hurricane Irma approaches, I am urging every Floridian to get a plan and be prepared for potential life threatening impacts from the storm,” Gov. Rick Scott said in a statement.


Former auction group CEO Steve Simon joins CARS Recon board

FRANKLIN, Tenn.  - 

Entrepreneur and former auction industry executive Steve Simon has joined the board of directors at CARS Recon, the company announced this week.

Simon was the founder and chief executive officer of the American Auto Auction Group, which was established in 2010 and then rebranded to XLerate Group in 2014.

Simon, who retired in 2012, was also the founder and CEO of Auction Finance Group and the chairman and CEO of the Canadian Auction Group

Since his retirement, Simon has served on several boards of community service organizations in Charleston, S.C., and worked as a mentor in a local elementary school system.

“We are thrilled to have Steve join our corporate family,” CARS Recon president CEO Ron Hope said in a news release. “With more than two decades of dedicated service to our industry, his amazing energy, passion and creative expertise is well known to us all.

“We look forward to Steve assisting us in growing our national and international footprint.”

Simon joins fellow non-executive advisers Tony Moorby and Tom Cunningham on the CARS Recon board. 


Dealers see rougher units in the lanes as values even out

LAWRENCEVILLE, Ga. - 

As August closed and the quality of vehicles in the lanes deteriorated a bit, the new Black Book Market Insights report showed vehicle values didn’t soften quite as much as they had earlier in the month.

Beginning with volume-weighted car data, editors determined that overall car segment values declined by 0.36 percent last week. In comparison, depreciation backed off the preceding five-week average of 0.52 percent.

Within the car segments, Black Book found that sporty and full-size car segments had the poorest weekly retention rates, decreasing by 0.81 percent and 0.60 percent, respectively. These two segments, accompanied by compact cars, were the only segments to receive steeper depreciation rates compared to the prior week, according to the report.

Taking a look at trucks, editors indicated that volume-weighted information showed overall truck segment values — including pickups, SUVs and vans — decreased by 0.25 percent last week. For comparison, the previous five-week average for truck segments came in at 0.33 percent.

Among the truck segments, sub-compact crossover values fell 0.65 percent, followed by compact luxury crossover/SUV and minivan segments, both dropping 0.50 percent.

Moving along to the anecdotes Black Book representatives picked up while at the auction, recaps from two different regions of the country noted how rougher units are rolling over the block.

“A high percentage of edgy condition vehicles appeared in the auction today. Too many cars needing paint work, and frame damage vehicles were present, which resulted in a low sales percentage,” said Black Book’s lane watcher in Massachusetts.

Down in Georgia, a similar story appeared as Black Book shared, “Attendance was normal for early fall today. There was disappointment regarding the condition of the vehicles offered and the amount of no-sales was up.”

Before talk of Hurricane Irma began to dominate the scene in Florida, two of Black Book’s representatives in the Sunshine State collected these observations.

“Retail is beginning to drag here, which is translating into more vehicles being passed on at the auction. That being said dealers continue to buy good, clean, low- mile units to fill the holes in their inventory,” the first Florida report said.

The other recap added, “Late model rental and off lease sales carried an otherwise average auction. I spoke with several dealers who are looking for clean, older vehicles with a desirable price point for their retail lots. Competition is strong for this segment of the market.”

Finally, the stories from the lanes wrapped up in the Midwest with this observation in Indiana: “Low consignment seems to have become the norm with many more buyers than sellers. Trucks continue to be scarce along with the really nice units.”

Specialty report

As Black Book does on a monthly basis, editors shared their assessments of the speciality markets. Here is the rundown:

—Collectible Cars: Editors said the collectible car auctions held on the Monterey Peninsula in mid-August were very successful, especially at the top end of the vintage exotic market.

—Recreational Vehicles: Black Book found that the auction results last month were “a bit surprising.” Editors continued with, “Towable values did exactly what we expected them to, but motorized units, which should also be declining, shot up nearly 15 percent.”

—Powersports: Editors indicated the Powersports market continues to see downward pressure on pricing in all segments as the market heads into the fall.

—Heavy-Duty: Editors summarized this segment by saying: “We’ll see if the current fairly stable value decreases hold up when new trucks start to ship and more out of service units become available.”

—Medium-Duty: Finally, Black Book surmised here that the wholesale market continues its downward trend as it inches closer toward fall. “This past month we experienced a bit more depreciation than we did in June,” editors said.


Storm roundup: Auction arbitration change; NADA reiterates call to help

CARY, N.C. - 

The weather-related developments connected to the used-vehicle industry arise seemingly by the day now that it’s near the height of hurricane season.

While the National Auto Auction Association Standards Committee made an adjustment to the NAAA arbitration policy, Group 1 Automotive described what shape that dealer group finds itself in the aftermath of Hurricane Harvey.

Meanwhile, Texas Automobile Dealers Association president Bill Wolters reiterated the urgent need to help dealerships and their employees impacted by flooding.

And now, Hurricane Irma is churning through the Caribbean as one of the strongest storms ever observed by federal officials with the possibility of it striking Florida and other parts of the Southeast in the coming days.

NAAA on flood damage disclosure

According to a statement sent during Labor Day weekend, NAAA officials explained that currently, a flood damage disclosure (from sellers to buyers) was only required for vehicles selling under the following sale light combinations:

• Green light only

• Green/yellow light

• Yellow light only

For vehicles sold under the red light a disclosure was not required. But effective on Tuesday until further notice, NAAA indicated sellers will now be responsible for any/all flood damage disclosures to buyers when selling regardless of sale light, which includes the red light.

Officials also said the time period for flood damage via auction inspection is now extended from the “B & C” to “30 days from sale date.” They added the time period for flood damage via DMV and/or insurance company records will remain the same at “120 days.”

“The NAAA Standards Committee strongly urges all selling and buying clients to inspect the vehicles prior to the transaction to avoid arbitration issues,” officials said. “See NAAA.com’s reference page for flood damage inspection best practices.”

NADA Foundation still in need

While some dealers might be looking for inventory, of immediate concern in some portions of the Lone Star State centered on what was shared by Wolters, who implored the industry to give to the NADA Foundation’s Emergency Relief Fund.

“NADA created the Emergency Relief Fund to give immediate funds to these employees to help them bridge the gap until they can get their lives back together," said Wolters, who represents 1,300 franchised dealerships in Texas, in a news release. "We need those thousands of dealerships across the country to pull together to help these dealership employees get back on their feet. We really, really need everyone to step up and help us get through this.”

The National Automobile Dealers Association elaborated more about the situation

The NADA Foundation is calling on dealers, dealer association groups and others to its Emergency Relief Fund, which is dedicated exclusively to providing financial assistance to dealership employees.

Dealership employees who sustained personal property damage caused by the hurricane and flooding .

Since 1992, the NADA Foundation’s Emergency Relief Fund has provided more than $6 million to 9,200 dealership employees and their families across the country.

For more information, call (703) 821-7102.

Update from Group 1

Over at Group 1, leadership maintained that the company’s top priority is supporting its nearly 3,000 employees in the greater Houston and Beaumont areas of Texas.

Executives acknowledged that approximately 500 of their associates suffered significant property losses from flooding and storm damage. The company is assisting these employees by providing disaster pay and further financial support from the Group 1 Foundation.

Despite damage to some facilities and inventory due to record-breaking flooding in the region, Group 1 determined that preliminary assessments indicate all facilities are intact and fully operational. Group 1’s Houston stores reopened last Wednesday. The company’s Beaumont stores reopened on Thursday.

The dealer group said total damages associated with the storm are estimated at approximately $15 million. This amount includes insurance deductibles for damaged inventory and facilities, disaster pay for employees, and financial support for team members whose homes flooded.

“Our top priority is supporting our employees in the areas affected by Hurricane Harvey. The size and scope of this disaster is almost beyond comprehension and the losses many of our employees and their family members have suffered is staggering. Our hearts go out to all of those affected by this devastating storm,” Group 1 president and chief executive officer Earl Hesterberg said in a news release.

“Beyond helping our employees, we are also moving quickly to get our stores fully online to support the community’s needs for replacement vehicles,” Hesterberg continued. “Through some extraordinary efforts by our team, we have all of our stores in both Houston and Beaumont open. And while we did sustain some inventory losses, given that we have over 15,000 units in stock in the impacted area, we are proud of the proactive efforts taken by our dealership teams that greatly protected our new and used inventory. Their actions preserved over 98 percent of our available inventory, which allows us to rapidly assist customers in need of replacement vehicles and service.

“The company’s third quarter results will be impacted by both the non-recurring costs highlighted above, as well the impact of the business disruption for an entire week across the Houston region, which represents Group 1’s largest revenue-generating market,” he went on to say.

Roaring Irma

As Texas tries to recover from Harvey, Florida already declared a state of emergency because of Irma, which on Tuesday afternoon was classified as a Category 5 storm with sustained winds of 185mph.

Irma is approaching the strongest storm readings ever recorded by federal officials, which determined Hurricane Allen topped out at 190mph in 1980 as it swept through the Caribbean and Gulf of Mexico before colliding with south Texas.

With places like Puerto Rico already squarely in Irma’s path, officials in the Sunshine State mobilized its National Guard as all 7,000 Florida members will be reporting for duty on Friday morning. The state is also leveraging its connection to regional guard resources where another 30,000 troops, 4,000 trucks and 100 helicopters could be made available, if needed, according to a news release issued by the office of Gov. Rick Scott.

“With Hurricane Irma now a Category 5 storm, we must do all we can to prepare our families and communities for any potential impact from this major weather event,” Scott said. “We do not know the exact path of this storm, but weather can change in an instant and while we hope for the best, we must prepare for the worst.”

 

Editor's Note: Video in window above courtesy of NADA. 


Considering used affordability & availability after Harvey

ATLANTA and SANTA MONICA, Calif. - 

The used-vehicle industry appears to be in better position to welcome extra demand stemming from destroyed units strewn within the path of Hurricane Harvey.

But can individuals who lost so much in Houston and elsewhere in the Gulf region handle the potential extra cost of securing new transportation? That’s what experts are now considering.

During a conference call with the media on Friday, Autotrader executive analyst Michelle Krebs said, “Affordability is going to be an issue. These poor people are going to be challenged financially if they’ve lost homes and don’t have insurance and they’ve also lost their car. That’s something we’ll have to watch carefully.”

Krebs mentioned that while there are plenty of off-lease units in the wholesale space — nearly new units less than 4 years old — she pointed out that vehicles that are 4 to 8 years old and are “much affordable are in much tighter supply.”

Cox Automotive chief economist Jonathan Smoke quantified Krebs’ point with some specific figures, stating during the same call that there are roughly 20 million less units that are between 4 and 8 years old than those nearly new, off-lease vehicles.

Still Smoke noted that at least there are used vehicles available in the auction lanes. After Superstorm Sandy in October 2012, that was not necessarily the case.

“When you think about when Sandy impacted New York, more of that (demand) ended up into new-vehicle sales because at that time there weren’t very many used or relatively new vehicles because we were coming out of the Great Recession and the lowest vehicle production period, from 2009 through 2011. That pushed people a bit more toward new,” Smoke said.

Whether they’re buying used or new vehicles, Kelley Blue Book senior analyst Alec Gutierrez acknowledged vehicle shoppers and owners in the Houston market gravitate toward SUVs and trucks. Affordability and the dire situation might lead to some changes as Gutierrez mentioned that midsize and compact car inventories on the new-car side are each at or near 100 days’ supply.

“These are folks who are looking to get back on the road as quickly as possible so they can put their lives back together and get to their work if it wasn’t impacted,” Gutierrez said. “(Midsize and compact sedans) are affordable basic transportation. You might see some folks switch their preferences to find an affordable unit.”


CarMax kickstarts customer appreciation months for dealers

RICHMOND, Va. - 

As part of CarMax Auctions Customer Appreciation Months for registered dealers, customers can look forward to upcoming events filled with catered meals and giveaways.

Customer appreciation events are set to take place at each of the company’s 73 auction locations throughout September and October.

CarMax Murrieta, the company’s largest auction facility on the West Coast, in Murrieta, Calif., will host its inaugural customer appreciation event on Oct. 30. CarMax opened the new facility earlier this year.

The auction is anticipating an estimated 400 visitors to attend the inaugural event, according to CarMax.

“We look forward to celebrating our customers who have supported us since we opened our auctions facility in February,” CarMax Murrieta auction services location general manager Carlos Raygoza said in an email. “We value these relationships and are excited to hold this event in their honor.”

Additionally, CarMax Auctions are open to dealers only, and sales are held in a live, open bidding format.

Click for a full schedule of events sorted by auction location.


KAR looking to care for employees & customers in wake of Harvey

CARMEL, Ind. - 

As passionate as Jim Hallett spoke about the ways KAR Auction Services is geared up to handle the wholesale market workload coming because of Hurricane Harvey, the company’s chairman and chief executive officer emphasized more than anything during an exclusive conversation with AuSM on Friday how the well-being of nearly 1,000 employees in the impacted region trumped it all.

While KAR wasn’t aware of any employees being injured, Hallett shared that some individuals initially ended up in shelters after being rescued by emergency personnel. That stark reality is giving KAR’s team some profound perspective as Insurance Auto Auctions braces to process thousands of damaged units and ADESA prepares for the likelihood more units will be coming down the lanes at physical facilities or online.

“I think you start with a good word, horrific. First and foremost, we’re talking about lives here. We’re talking about people losing their lives in this event. Losing their homes and their entire belongings. When you think about it, it’s just really devastating,” Hallett said.

“We’re truly committed to our employees and truly committed to the community,” he said later during the phone conversation. “We want to help these employees and want to help these communities rebuild. We’re going to work with local officials to help people get re-established. This is a big comeback here.

“I want to tell you how proud I am of this organization and how proud I am of all of our employees throughout KAR, all of KAR, all of our business entities. It’s unbelievable the number of employees we’ve had say, ‘How can I help?’ These are employees not anywhere near Houston; employees that are scattered around the country and North America who are stepping up,” Hallett went on to say.

“That’s such a refreshing feeling and speaks to the culture at KAR,” he added.

KAR also is organizing programs so its employees can volunteer as well as donate financially.

“We want to take care of our own but also want to be able to help the community, as well,” Hallett said. “It makes me very proud as CEO of this company to know we have a culture that cares, not only cares about ourselves but cares about each other and our community. At the end of the day as tough as this is and difficult as it is, it’s going to make our company even stronger.”

Stronger plan at IAA

Also participating on the exclusive call was John Kett, who is chief executive officer and president of Insurance Auto Auctions. While IAA and its insurance company clients are still gathering information, Kett acknowledged the damage from Harvey is likely to surpass what the company handled during Hurricane Katrina and Superstorm Sandy.

“We’re really going to focus on the recovery,” Kett said. “At IAA, that’s really where we begin to help. We’re helping to get those vehicles off the streets and out of people’s yards and helping the insurance companies settle claims so they can help their policyholders begin to rebuild their lives. First and foremost, that’s what we provide in an event like this.”

Kett highlighted how IAA has modified its disaster response, using the experiences gained through Katrina, Sandy and Hurricane Matthew last fall. One component of the enhanced planning Kett explained is how IAA already identified key personnel who will be a part of handling tasks associated with natural disasters like hurricanes. He indicated members of that team headed for Texas even before Harvey finished dumping more than 50 inches of rain in some locations near Houston.

Kett noted that IAA also has improved its database of pre-screened tow truck operators as more than 1,000 units are set to pick up damaged vehicles in the region. He also touched on how IAA is making sure additional employees have temporary housing accommodations and plenty of fuel is available for equipment. It’s all part of mobilizing as much as possible for when the real heavy-lifting beings.

“Our approach is getting people there, getting equipment and getting capacity. We have a plan throughout the flood-prone areas to have additional real estate available. The size and scale of this were far beyond our normal planning horizon so we’re adding hundreds of acres as we speak,” Kett said.

“We’ve done a much better job of being ready. We worked through our plans during the non-catastrophe part of the year so when the storm does hit we can just put those plans into motion,” he continued.

And once IAA coordinates with insurance companies and salvage units are to be sold, the company already has plans in motion for those tasks, too.

“Once it’s time to begin to liquidate, another thing we bring to the table is we’ve got an extensive buyer base both domestically and internationally. We’ve got buyers in 110 countries. They like this type of inventory,” Kett said. “We’re already beginning to build marketing campaigns to make them aware so they’re ready when we’re able to begin selling these vehicles.”

Meeting needs of dealers & consignors

Not far off from his emphasis on the well-being of employees, Hallett also described how the entire KAR family of companies is looking to cater to the needs of dealers as well as consignors since Harvey is leaving the wholesale market in a unique position. For example, additional off-lease volume no longer is likely to be troublesome.

“This is a big opportunity for the remarketing customers. I think this is really going to help many these captive finance companies and leasing companies to be able to move some of these what I call young vehicles, 3-year-old, off-lease cars with 40,000 miles on them, and move them into the Houston market and have a great outlet for these vehicles,” Hallett said.

“I do believe we were concerned about some price erosion with oversupply of off-lease cars,” he continued. “I think there may even be an opportunity for the price to stabilize if not improve a little bit. That’s not just in the Texas market. That could affect prices across the country.”

While hundreds of KAR employees have been impacted by Harvey, Hallett wanted the entire industry to know KAR is “open for business.” The company indicated usual activities at ADESA, IAA and AFC operations in Texas and beyond are on schedule.

“We want our customers to know, both sellers and buyers, that we are absolutely going to do everything we can to support their selling and buying activities in every possible venue we have, including our physical auction footprint, our online nationwide private label business through OPENLANE and TradeRev that allows dealers to buy vehicles as well as AFC that provides the liquidity to buy these cars,” Hallett said.

“We’re not going to take advantage of the situation,” he added. “We’re not going to increase prices because of demand. We’re going to be very fair and understanding. We’re going to do business as usual without putting any extra burden on the buyers and sellers. We’re going to assist them in any way we can.”


Cox Automotive: Value of Harvey-damaged vehicles could reach nearly $5 billion

ATLANTA - 

Cox Automotive chief economist Jonathan Smoke on Friday estimated vehicle losses caused by Hurricane Harvey to come in between $2.7 billion and $4.9 billion in the Houston market alone.

While that projected figure includes dealerships’ used-vehicle inventory since those units are classified as vehicles in operation, Smoke indicated that loss figure could swell even more once the damage toll of new vehicles flooded at franchised dealerships is tabulated, too.

“Our hearts go out to the people of Houston and everyone impacted by the weather,” Smoke said to open a conference call Cox Automotive hosted for the media before delving into the loss estimates.

Smoke reiterated his previous assessment that 300,000 to 500,000 vehicles are likely damaged just in Houston; the seventh market largest by population and eighth largest for vehicles in operation consisting of 5.6 million units.

“We reviewed damages numbers in both (Hurricane) Katrina and (Superstorm) Sandy, which were the most comparable storms. We looked at the reporting of wide-spread flooding, which more resembled Katrina than Sandy. We took into account the high vehicle density and the dependency on vehicles in Houston,” Smoke said.

“Therefore we concluded that 500,000 (units) was entirely possible,” he continued. “If we’re correct, it would be the worst in terms of vehicle damage in history. Sandy impacted a bigger market, but the damage was not as severe, and the vehicle density was lower. Katrina had even more severe damage but in less populated, less vehicle dense and smaller area.”

With so much damage likely to be recorded, Smoke delved into the wholesale volume and price ramifications likely ahead.

The record-setting streak for the Manheim Used Vehicle Value Index already reached three months in a row when Cox Automotive shared the latest reading on Aug. 7.

The report indicated wholesale used-vehicle prices (on a mix-, mileage- and seasonally adjusted basis) increased 0.75 percent month-over-month in July. This rise brought the index reading to 130.3, which was a record high for the third consecutive month and a 2.6-percent increase from a year ago.

The new high mark is more than 30 points above the index’s low point of 98.0 registered in December 2008.

To project what might happen, Smoke explained that he and the Cox Automotive team went back to Manheim data recorded at the time of both Katrina and Sandy.

“Basically it behaved as you would expect,” Smoke said. “If you take a step back and think, ‘OK the disaster does two things simultaneously.’ It decreases supply both in terms of what might have been on dealer lots in those locations, but also in terms of what would have been potential supply; cars that people might have been trading in or otherwise selling. And at the same time, it increases demand because people are needing to replace their vehicles in a very short period of time that otherwise would not have been remotely considering a vehicle purchase.

“What we’ve observed is you see a break in the pattern in terms if there had been continued growth in supply in the wholesale channel, sudden in the non-salvage you see flat or declining volumes for a couple of months. And related to that you typically see price strength, which makes complete sense. If there is tighter supply and stronger demand, that would amplify prices for a two to three months following the storm,” he continued.

“Wholesale prices have been really strong for the last three months,” Smoke went on to say. “The indicator in August was that trend was continuing so that means wholesale prices are very likely to be strong through the end of the year. Before I was sort of on the fence about whether or not that trend could continue indefinitely or whether it would reach a place and plateau. Now this effect on supply, it’s likely to remain at least as strong as we’ve been seeing through the end of the year.”

And as dealers look for inventory to meet rising consumer demand, the salvage space is likely to become even busier as Harvey-damaged units make their way into that wholesale segment.

“No question this is the biggest event in history in terms of the total volume of vehicles damaged,” Smoke said. “This is going to have lingering effects on the wholesale market for some period of time in terms of increased volumes that should be going to salvage and working their way through the system. But also in terms of the industry and consumers having to deal with their own due diligence in tracking vehicles that could have been damaged but didn’t get properly identified as damaged, and therefore, salvage.”

Editor’s note: Watch for a future report from AuSM that will highlight analysis from experts at Autotrader and Kelley Blue Book about how the damage from Hurricane Harvey will impact retail sales.


UPDATED: Harvey damage estimate approaches 1M vehicles

CARY, N.C. - 

As auctions in the region continue to modify their businesses in the wake of Hurricane Harvey, Black Book shared an estimation on Thursday morning that 500,000 to 1 million damaged vehicles will have to be replaced in the city of Houston and surrounding regions.

The National Weather Service said on Wednesday that the storm dumped 51.88 inches of rain in Cedar Bayou, Texas, establishing a new record within the continental U.S.

“Black Book expects the impact of the hurricane to have far-reaching effects, not only on Houston-area automotive businesses such as dealerships and wholesale auctions, but also throughout the South and Midwest,” the company said in a message to AuSM.

“In fact, the storm continues to actively affect parts of Louisiana, moving northeast toward Tennessee,” Black Book continued.

According to an announcement posted on LinkedIn by Casey Allison, who is operations manager at America’s Auto Auction Houston, both of the company’s facilities in the Bayou City cancelled their weekly sales.

“Taking into consideration the safety of our America’s Auto Auction employees and dealers, we have decided to cancel this week’s sales,” the announcement said. “Both North Houston and South Houston America’s Auto Auction locations will resume next week.

“Our main priority is to focus on the well-being of those effected by the hurricane,” the announcement added.

Earlier this week, Cox Automotive officials explained how its Manheim facilities in the region initially would be handling challenges presented by Harvey.

According to an updated message sent to AuSM late on Thursday afternoon, the company said no sales will be held at Manheim Houston, Manheim Texas Hobby and Manheim South Houston during the week of Sept. 4.

In Louisiana, the team at Lake Charles Auto Auction sustained the impact when Harvey circled back into the Gulf of Mexico and struck near the three-lane facility this week.

“We have experienced tremendous volumes of rain and experienced some flooding,” Lake Charles Auto Auction owner Matt Pedersen said in a release sent to AuSM, “but nothing like our neighbors in Texas.”

Lake Charles AA delayed its usual Wednesday sale with plans to host it on Friday. The auction serves dealers from Lake Charles, Baton Rouge, Lafayette and New Orleans and throughout Louisiana, and because of its proximity to southeast Texas, regularly welcomes dealers from Port Arthur, Beaumont and Houston, as well.

“This delay has given us time to begin the logistic preparations that will occur in coming weeks,” Pedersen said. “Vehicles will be moved across the country to begin replacing the thousands of vehicles flooded and destroyed throughout southeastern Texas and in pockets of Louisiana.”

As auctions and dealers look to reorganize, Black Book projected that the rental industry will be impacted first with the supply challenge as thousands of residents will need to find immediate replacement of personal transportation.

“This entails not only a large quantity, but also the right mix of vehicles. Work trucks and service vehicles will be in extremely high demand immediately,” Black Book said.

Black Book recapped that early estimates say more than 500 dealerships have been impacted in the greater Houston area alone.

“We believe there is enough new inventory in the U.S. to supply the consumers’ needs, and the timing may actually be good with new-car stores looking to deplete the 2017 models at model-year changeover,” Black Book said.

“New-vehicle SAAR that has been on a decline this year will see a lift in the coming months as residents start replacing their damaged vehicles,” editors continued.

Pedersen noted how commercial consignors likely will be steering volume toward the region to meet upcoming demand. He added that his operation in Lake Charles could be a prime place for dealers to find the inventory they need. recently broke ground on a new 6,500 square-foot office facility, which will open in next fall.

“We have heard from consignors around the tri-state area who want to be able to market their vehicles to dealers who must fill this important need quickly and efficiently,” Pedersen said. “The transportation companies like the logistics of our location to facilitate the movement of vehicles from around the state.

“Given the extent of this disaster,” Pedersen said, “we expect the need for slightly older and late-model used cars, trucks and SUVs to last for months. We will be doing all we can to help facilitate this recovery. The first thing people will need to begin the process of their homes and businesses back in order is a vehicle.”


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