Sales Reports

Asbury cites software upgrade impacting Q4 used performance

DULUTH, Ga. - 

Just like that four-cylinder engine in a 2017 model is probably much more efficient and robust than the same level power plant in a vehicle 10 years older, Asbury Automotive Group is anticipating an ongoing software upgrade will rev up its used-vehicle department to a much higher performance than what the dealer group experienced to close the fourth quarter.

Acknowledging the software changeover had an noticeable impact, Asbury reported that its Q4 same-store used-vehicle retail revenue decreased 6 percent year-over-year while gross margin dropped by 10 percent on the same time comparison.

In terms of units, Asbury retailed 17,822 used vehicles during the fourth quarter, a drop-off of 2,059 vehicles or 10 percent year-over-year.

For the year, Asbury retailed 76,929 used vehicles, down 3 percent or 2,330 units compared to the 2016 total. The dealer group’s average gross profit per used unit retailed dipped 5 percent or $79 in 2017 to $1,574.

While those might be some negative figures, Asbury leadership is hopeful a dramatic software upgrade — expected to be completed by the close of the second quarter of this year — will provide the lift the company needs to enjoy record used-vehicle performance.

Asbury senior vice president of operations John Hartman told investment analysts during a February conference call, “While the new software will benefit us in the long-term, the implementation led to business disruption, putting pressure on our used sales.”

Later in the call, Hartman elaborated about some of the software’s capabilities.

“The biggest difference is we track market-day supply on used,” Hartman said. “Now if we look at a vehicle, if it has a low market-day supply, we know that vehicle will turn quicker and we can price it appropriately versus a vehicle that has a high market day supply and there's abundance of them in the market. We need to price that more aggressively to move it quicker. So the data is much more fine-tuned.”

Asbury president and chief executive officer David Hult immediately chimed in saying, “The other significant increase I’ll add to that, from appraising the vehicle, it’s more real time data, meaning today and this week what’s happening and the old software was really a 90-day look back.”

While Hult didn’t specify exactly how old Asbury’s software, it might be fair to assess that the platform might have been limited like that four-cylinder engine only pushing out a little more than 100 horsepower.

“We’re not a huge a company, but anytime you change something across the enterprise, it’s painful, so you put it off for long periods of time,” Hult said.

“The software we had was serviceable, but the data that it gave us wasn’t as timely as what the new software gives us,” he continued. “The new software is far more complex and more data-driven than the old, so we’re confident once we get comfortable with it, we’ll really be able to increase our turn, which is what we’re focused on. We want to turn the inventory faster and naturally grow our volume through trades.”

Top-line measurements

In other parts of its financial statement, Asbury reported its Q4 net income came in at $42.5 million or $2.03 per diluted share, down compared to $67.1 million or $3.08 per diluted share in the prior-year quarter.

The company explained its net income for the fourth quarter was adjusted for a $5.1 million pre-tax loss for franchise rights impairments ($0.15 per diluted share) and a $7.9 million benefit ($0.37 per diluted share) related to adjustments to deferred tax balances as a result of recent changes to the tax law.

As a result of recent changes to the tax law, Asbury is expecting its effective tax rate to be between 25 percent and 26 percent in 2018, which is down from its prior guidance of approximately 38 percent.

Finance office update

Asbury’s F&I performance was a bright spot during the fourth quarter. The dealer group posted a year-over-year lift of 10 percent or $153 in F&I gross profit per unit, landing at $1,652.

And by and large, Hult indicated that Asbury has the access to get its customers financed.

“I haven’t seen a big shift in the credit at all, as far as in the subprime market, which is a small percent of our business. The stipulations are getting a little bit tighter, but credit availability hasn’t been an issue in all the tranches,” he said.

2 factors changing landscape of fleet sales

CARY, N.C. - 

Dumping sedans into fleet sales is certainly a path-of-least-resistance option leveraged by automakers in the past, but experienced used-car market observers understand the severe damage that strategy can do.

However, in light of technology advances and consumer preferences — not only in the United States but also globally — pulling the fleet lever doesn’t quite have the keep-the-metal moving impact that automakers experienced, especially when it comes to those sedans.

Cox Automotive senior economist Charlie Chesbrough and Autotrader executive analyst Michelle Krebs explained why during a conference call earlier this month.

“Consumers are clearly indicating that they love crossovers, and they can’t get enough of them,” Chesbrough said.

“We don’t see an end to this shift,” said Krebs, who later added, “There has to be a lot of contemplation going on in product planning meetings about how many car models and how much car production capacity each automaker has versus their utility lines and those capacities. I’m sure those discussions are going on.”

Perhaps those discussions are happening particularly within the meeting spaces in Michigan where domestic automakers have a noticeable presence in fleet sales. Here’s a quick rundown of what the Big 3 reported in the fleet department for January:

— Ford: Fleet sales of 45,956 vehicles were down 12.0 percent due primarily to a planned change in delivery timing of daily rental sales.

— General Motors: The automaker indicated 23.8 percent of January sales went into the fleet segment, representing a 2.9-percent lift year-over-year.

— Fiat-Chrysler: The OEM reported fleet activity accounted for 16 percent of total January sales.

The reported metric from Chrysler struck Chesbrough, who said, “That’s a fairly healthy range to be in, if you had to pick a number for fleet.

“Early indications are that there may be some agreements between the OEMs on who they’re supplying. Whether this trend carries through the rest of the year, we don’t know. Fleet was a big story last year. Cutting back in fleet by a couple hundred thousand units basically took us back from being close to another record sales level to seeing sales come in a little bit below,” he continued.

“So if fleet is weak again, it does suggest the market is going to have a hard time hitting even the high 16 million that most forecasters have right now,” Chesbrough went on to say.

And when even fleet sales are soft for a particular new model, Chesbrough explained that automakers now have limited options to retail those units beyond the United States, previously a viable choice.

“As much as we see here in the United States this shift away from cars and more toward this crossovers, this is a global phenomenon,” he said.

“This is happening in every major market around the world. Consumers love the crossover vehicles. They’re not that interested in cars anymore,” Chesbrough said.

“It makes the strategy for all OEMs to say, ‘How much do we invest in these cars?’ They have a lower margin. Before you could always say, ‘Well after we satisfy demand here we can ship it somewhere else and that will be the play.’ But because there is not a lot of demand for these vehicles anywhere, that’s not a viable option,” Chesbrough added.

Perhaps the advancements automakers have made to enrich profitable CUVs are coming at the cost of the value proposition sedan could offer.

“Another factor is we’ve made such advancements in fuel technology for these bigger vehicles. It was always the case that higher gas prices or the threat of higher gasoline prices always brought buyers back home to cars. They had a lower operating cost,” Chesbrough said.

“But now there’s not that big difference in fuel economy. There’s really no savings to be had but getting into the car version of a platform over the CUV version. I think it’s going to be a tough road to hoe for cars. I don’t see them coming back anytime soon even if gas prices spike, I see them coming back only a little bit,” he went on to say.

Krebs shared an example of a specific vehicle that’s often turned first in the fleet segment and then being impacted by the appeal of utilities. She added how the matter is compounded with an off-lease surge of popular models.

“With the (Chevrolet) Cruze, that’s a car that has significant fleet sales. When GM cuts back on fleet, it’s going to hit vehicles like the Cruze,” Krebs said.

“There’s are going to be a lot of off-lease utility vehicles coming back into the market so someone might be thinking about a brand new Cruze because that what’s they can afford — and I’m not picking on the Cruze — but they really want a sport utility. And now they’ve got more choices with more 3-year-old utilities in the market,” she went on to say.

Also during the call, Krebs interjected to a consumer-facing media participant about why avoiding fleet-heavy sales — in the United States or anywhere — is prudent no matter what vehicle segment is popular.

“Part of the strategy of some of the automakers to move away from fleet so they can keep their resale values up. It’s not a total negative across the board,” she said.

39.5 million used-car sales expected this year

CARY, N.C. - 

There was a 1-percent hike in used-vehicle retail sales in 2017, according to Cox Automotive, which reported the year ended with 39 million used cars sold.

And look for more growth this year.

The company is anticipating 39.5 million used-car retail sales in 2018.

As for 2017, the year closed with used-car sales climbing 4 percent from December 2016.

The seasonally adjusted annualized rate for used sales in December was 38.9 million.

Over at Edmunds, the company was projecting late in the month that December would finish with 2.7 million used-car sales, down from 2.9 million in November.

Its used-car SAAR forecast for December was 38.8 million. It finished at 39 million in November.

 Within the certified pre-owned slice of the used-car market, sales reached a seventh straight record year.

According to Autodata Corp., there was an estimated 2,645,718 CPO vehicles sold in 2017, compared to 2,642,986 sold in 2016.

That’s a gain of just 0.1 percent, but it was enough to bump certified sales to their best year on record.

The year closed with 221,126 sales in December, which was down 4.8 percent year-over-year. Dealers moved 624,602 CPO units in the fourth quarter, which was off 2.7 percent year-over-year, according to Autodata.



CarGurus first earnings call as public company reveals 56% revenue spike

CAMBRIDGE, Mass.  - 

After holding its IPO in October, CarGurus hosted its first earnings call as a public company on Tuesday. And results from the third quarter, which ended Sept. 30, didn’t disappoint.

Total revenue for the online vehicle marketplace came in at $83.0 million, which represents growth of 56 percent year-over-year.

 “We are very pleased with our third-quarter results, which are highlighted by robust top line growth and ongoing profitability,” Langley Steinert, founder and chief executive officer of CarGurus, said.  

“Our strategy of building the world’s most trusted and transparent automotive marketplace is delivering a disruptive value proposition to consumers,” he said.

Steinert went on to call the recent initial public offering — which generated net proceeds to the company of approximately $43.0 million — an “important milestone” for the business.

“CarGurus now has greater brand awareness and enhanced resources to execute our growth strategy and further extend our rapidly growing leadership position,” he explained.

As for what contributed to the impressive revenue growth in Q3, the company shared during the call that marketplace subscription revenue was at $73.9 million. This is a jump of 59 percent when compared to the same quarter last year. Advertising and other revenue came in at $9.1 million, which also increased considerably — 36 percent — compared to $6.7 million in Q3 of last year.

As for how these numbers break down by dealers — you guessed it, those numbers were up considerably, as well. Total paying dealers on the site came in at 26,553 at the close of the third quarter—up 37 percent from a group of 19,403 in Q3 2016.

And revenue from these dealers was up by double-digits, as well. Average annual revenue per dealer in the U.S. came in at $11,526, an increase of 16 percent compared to $9,939 in the third quarter of 2016.

It seems more consumers are aware of the site, as well, since the U.S. average number of monthly unique users on of 26.0 million in Q3 represents an increase of 24 percent year-over-year.

It has been a big year for players in the online automotive space going public., Carvana and now CarGurus have each rolled IPOs in 2017.

And with CarGurus public, at least four of the major players in its space are now publicly traded (TrueCar, AutoWeb [formerly Autobytel], and CarGurus).

AutoNation praises One Price strategy for improved Q3 used sales


AutoNation chairman, chief executive officer and president Mike Jackson didn’t hesitate to point out the reason why the dealer group’s used-vehicle sales during the third quarter jumped 6.4 percent year-over-year.

AutoNation stores retailed 59,330 used vehicles during Q3, up from 55,760 units a year earlier. Jackson told investment analysts why stores moved more used metal when the company hosted its quarterly conference call on Thursday.

“I would say the AutoNation branded One Price experience for pre-owned drives tremendous traffic and interest through our website and through our stores,” Jackson said. “So the One Price sale has to be competitive in the marketplace.”

Announced last October, AutoNation explained One Price allows the company to leverage centralized capabilities, such as centralized pricing and appraisals, and offers consumers a “transparent and stress-free buying experience.”

AutoNation was to fully implement One Price in all existing locations by the end of the second quarter of this year.

While AutoNation turned more used vehicles year-over-year, the company’s gross profit per unit on those vehicles softened by $105 to settle at $1,414. Jackson addressed that metric, too.

“On the margin side, we have to have really strong operational execution. That was not there in the second quarter. We had some issues. I was very forthright about that. We've comprehensively addressed them, and yes, I see more stability in that going forward,” Jackson said.

“So that’s how I see it,” he continued. “The One Price is an experience and a brand attribute that customers like and draws us a lot of business. Sales associates are very enthusiastic about it, particularly millennials that we're now able to attract to work for us, so they don't have to negotiate.

“And then, we on the operating side have to bring in the gross margins. That’s the formula,” Jackson went on to say.

Also in connection with its retail performance, AutoNation watched its new-model sales figure dip 2.4 percent year-over-year in Q3, coming in at 86,192 units after it had been 88,322 units a year ago.

In the F&I office, AutoNation generated an extra $66 per unit in gross profit in that department as the metric rose to $1,660.

All told, AutoNation reported its Q3 net income from continuing operations came in at $98 million, or $1.00 per share. The company estimated that Hurricane Irma negatively impacted Q3 net income by approximately $8 million after taxes, or $0.08 per share.

Also during the third quarter, AutoNation repurchased 9.2 million shares of common stock for an aggregate purchase price of $400 million. As of Oct. 31, AutoNation has approximately $114 million remaining board authorization for share repurchase and 91 million shares outstanding.

Update on parts initiative

Also announced last year, the company offers AutoNation branded parts and accessories at AutoNation USA — standalone pre-owned vehicle sales and service centers.

A year ago when explaining the concept, the company emphasized AutoNation Precision Parts is a high quality, competitively priced line of maintenance and repair parts.

The new product line has been integrated into the company's reconditioning operations, and now enable improved customer retention for retail service, wholesale parts and collision repair business units, including AutoNation USA.

AutoNation Precision Parts was launched in the third quarter of last year in the company's existing stores, with the introduction of AutoNation-branded batteries that feature an industry-leading free lifetime replacement guarantee.

AutoNation Auto Gear, the company’s branded automotive accessory line, offers auto accessories for lifestyle, appearance, protection and vehicle security. AutoNation Auto Gear was also launched in the third quarter in the company's existing stores and is available at each AutoNation USA store.

The company plans to expand both AutoNation Precision Parts and AutoNation Auto Gear product lines in phases as their product portfolios are developed.

With all of those developments in motion, Jackson responded to an inquiry about how much pushback AutoNation has received from automakers.

“Yes, there’s been a discussion of course, and I say to them, ‘Look, if I go back 10 years ago, we had front-end gross on new vehicle sales of 8 percent, 9 percent, cost of 4 percent or 5 percent And today, we have front-end gross of 5 percent and new-vehicle sales is almost a commodity pass-through business and that we have to make all our profits somewhere other than selling the new car.’ Now, I have a franchise, so I've agreed that we will do tremendous volume on new vehicles.

“I understand that. That’s my responsibility,” he continued. “But then I say to the manufacturer, ‘By the way, it’s your stair steps and your margin programs that have brought us to this state, and you’re quite delighted with the fact that front-end gross margins are down to 5 percent. So you have to understand I’ve made this investment in this facility, and I need a way to grow and to do that profitably. And a lot of business that I gave you in the past for relationship reasons, just only for relationship reasons, and partnership reasons, no longer make sense with a front-end gross of 5 percent.’”

So is there a bitter divide between OEMs and AutoNation? Perhaps not.

“And the end of the conversation, I would say is I have earned their respect,” Jackson said. “And they said, ‘If I was in your shoes, I'd be doing the exact same thing and I guess. We don't have to worry about it too much, because who else can do it other than AutoNation?’

“So OK, and I'll take it. That’s fine with me,” he added.

Group 1 sees unprecedented sales in Houston


The significant damage Hurricane Harvey left in Texas gave Group 1 Automotive the opportunity to watch new and used vehicles roll over the curb at daily sales rates during the last three weeks of September that “were the highest we have ever seen,” says president and chief executive officer Earl Hesterberg.

During the dealer group’s third-quarter conference call, Hesterberg elaborated about the development saying, “we’ve never seen anything like that before, and I don’t think we will ever see anything like that again. Our Houston stores on new vehicles basically doubled what they normally do. And bear in mind, these are some pretty big stores.

“Used vehicles were not up to that degree. They were probably up, depending on the stores, 30, 40 or 50 percent, probably more like 50 percent. But that tapered off, I would say, as we moved into the second week of October, but it’s still significant,” Hesterberg went on to say.

As Group 1 mentioned as a part of its third-quarter financial statement, some of its stores in Houston and Beaumont, Texas, were closed for seven days or longer as Harvey soaked the region with some of the highest rainfall totals ever recorded. With experts suspecting that Harvey might have destroyed nearly 1 million vehicles, Hesterberg is projecting sales to remain brisk at Group 1 stores

“I would expect that to continue well beyond the fourth quarter. Now, it will probably taper off from where it is now, but I think this will last for quite some time,” he said.

While not related to Harvey, Hesterberg also pointed out that Group 1 posted “noticeable improvement” in other regional footprints, including Oklahoma, central Texas and New England.

Group 1 executives did not specifically address their used-vehicle inventory, but Daryl Kenningham, who is president of U.S. operations, touched on new-model inventory. Kenningham said that the company overall was “happy” with the amount of new units on group lots, but that the company remained “tight” in connection with three brands, “Toyota, Honda, Lexus, specifically.”

Stockpile of cash

Group 1 finished the third quarter with nearly $67 million in cash among its assets; an amount representing a 218-percent spike compared to the figure at the end of the 2016 and triggering curiosity from Wall Street observers about what the company might do.

“We think acquisitions is our first best use of cash. You have seen that we have pulled the trigger on a few recently,” said John Rickel, senior vice president and chief financial officer of Group 1 while referencing how Group 1 purchased a pair of Jaguar-Land Rover dealerships in New Mexico as well as rolling out an Audi rooftop in Fort Worth, Texas.

“That’s the first, best use. And then from there, we basically are opportunistic between share repurchases and dividends,” Rickel added.

Group 1’s Q3 used sales tick 3.3 percent lower


While contending with the ramifications of Hurricane Harvey, Group 1 Automotive watched its used-vehicle retail sales soften by 3.3 percent year-over-year during the third quarter.

According to its financial report released on Thursday, Group 1 stores in the U.S. turned 26,304 used vehicles during Q3. That’s down from the 27,201 used vehicles that the company’s stores during the same quarter a year ago.

While the unit figure ticked lower, Group 1 managed to keep its gross profit per used vehicle retailed nearly identical. In the third quarter, it was $1,443, while it stood at $1,441 a year earlier.

However in the F&I office, Group 1 sustained a slight drop-off there, too. F&I gross profit on all vehicles retailed dipped 1.4 percent to $1,566; that’s $22 less year-over-year.

The used-vehicle and F&I activities helped Group 1 to generate a Q3 net income figure of $29.9 million, diluted earnings per common share of $1.43, adjusted net income (a non-GAAP measure) of $46.6 million and adjusted diluted earnings per common share (a non-GAAP measure) of $2.23.

The company explained that Q3 adjusted net income and diluted earnings per share exclude approximately $16.8 million of net, after-tax adjustments, or $0.80 per share, for non-core items. Group 1 noted these adjustments primarily consist of costs directly associated with Hurricane Harvey of approximately $9.0 million after-tax, or $0.44 per share; and, franchise right impairments of $5.9 million after-tax, or $0.28 per share.

“While the company’s third-quarter results were negatively affected by both the non-recurring costs from Hurricane Harvey, as well as business disruption for more than a week across our largest revenue-generating market, strong demand for replacement vehicles in September provided significant financial recovery,” said Earl Hesterberg, Group 1's president and chief executive officer. “We expect this recovery to continue for a number of months, as the region continues to rebuild from Hurricane Harvey's widespread impact.

“Our overseas businesses were also positive factors in our third quarter results,” Hesterberg continued. “Although the U.K. new-vehicle market declined roughly nine percent in the third quarter, we significantly outperformed the industry with our same-store new vehicle unit sales rising 2.9 percent. Our used-vehicle and F&I businesses were up almost 10 percent driving a total same store revenue increase of 9 percent on a local currency basis.

“In Brazil, our operations delivered another quarter of profitability, with gross profit up 19.4 percent on a same-store constant currency basis, reflecting continued double-digit growth in used, aftersales and F&I,” he went on to say. “Our combined performance in all three markets delivered record revenues, gross profit, and adjusted earnings for the quarter.”

Editor’s note: More details from Group 1’s third-quarter activities will be highlighted in a future report.

CarMax Q2 earnings and retail sales jump by double digits


CarMax posted double-digit increases in both net earnings and used vehicles retailed during the second quarter of its fiscal year.

And the company highlighted on Friday that CarMax achieved those results even though six stores in Houston were closed for a week because of Hurricane Harvey, creating a “modest adverse effect” on comparable store used-unit sales.

All told, CarMax retailed 186,019 units during the quarter that closed on Aug. 31, representing an 11.1-percent lift year-over-year. Halfway through its current fiscal year, CarMax stores have turned 381,292 units, producing a 12.6-percent improvement.

On a comparable store basis, the CarMax retail improvement wasn’t quite as robust, but still the company posted a healthy 5.3-percent year-over-year gain.

“The comparable store sales performance reflected continued solid improvement in conversion resulting from strong execution by our store teams and our digital initiatives,” the company said in a news release that accompanied its financial statement.

The metal rolling over the curb help CarMax generate a 9.7 percent rise net sales and operating revenues to $4.39 billion. As a result, net earnings increased 11.7 percent to $181.4 million and net earnings per diluted share rose 16.7 percent to $0.98.

The company calculated that its total gross profit increased 10.8 percent versus last year’s second quarter, climbing to $604.0 million. CarMax also highlighted its used-vehicle gross profit rose 12.0 percent, driven by the 11.1-percent increase in total used unit sales.

Used-vehicle gross profit per unit was consistent at $2,178 versus $2,160 in the prior year period.

On the wholesale front, CarMax sold 105,508 units through its auction channel during the second quarter, and halfway through the fiscal year the figure sits at 208,951 units. Both readings are nearly flat on a year-over-year comparison

Executives added wholesale vehicle gross profit increased 9.6 percent versus the prior year’s quarter, primarily due to an increase in wholesale vehicle gross profit per unit to $950 from $870.

“We believe this year’s second quarter wholesale gross profit per unit benefited from a favorable depreciation environment, relative to historical trends,” CarMax executive said. “Other gross profit increased 6.9 percent, primarily reflecting the changes in other sales and revenues.”

Also of note from the company’s latest financial performance, the company said CarMax Auto Finance (CAF) income increased 12.5 percent to $107.9 million. Average managed receivables grew 10.6 percent to $11.11 billion.

CAF indicated the total interest margin — which reflects the spread between interest and fees charged to consumers and the company’s funding costs, was 5.8 percent of average managed receivables compared with 5.9 percent in last year’s second quarter.

The provision for loan losses declined 7.8 percent to $32.9 million, compared with $35.7 million in the prior year quarter. The prior year’s provision was affected by unfavorable loss experience, while in the current year’s quarter, losses were generally consistent with expectations.

CAF went on to mention the allowance for contract losses as a percentage of ending managed receivables was 1.15 percent as of Aug. 31, compared with 1.18 percent reported as of May 31, and up from the 1.08 percnet reported as of Aug. 31,  of las year, “reflecting higher loss experience over the course of the last year,” according to the company.

2017 shows a pricier, fast-selling used-car market

CARY, N.C.  - 

Make it four straight months of record-high readings for the Manheim Used Vehicle Value Index.  

In August, wholesale vehicle prices — adjusted for mix, mileage and seasonality — were up 0.75 percent from July, according to the latest report on the index compiled by Cox Automotive chief economist Jonathan Smoke.

The resulting measure of Manheim’s index was 131.3, a 3.4-percent year-over-year increase and, once again, the highest ever reading for this index.

“Wholesale market values continue to show strength as a result of growing retail demand,” Smoke said in the report. “Most of the increase in used-vehicle sales is coming from double-digit year-over-year growth in sales of vehicles less than 4 years old.”

While Cox Automotive estimates that the seasonally adjusted annualized rate for used-car retail sales in August (38.1 million) was down from July (40.1 million), used-car sales have actually climbed 1.2 percent so far this year.

That includes what was best second quarter ever for the used-car market and the first time there was more than 10 million used-car sales in Q2, according to Edmunds.

Overall, there were 10.05 million used-vehicle retail sales in the second quarter, Edmunds said. That’s a 1.7-percent year-over-year uptick  and up 7.9 percent from five years ago.

What’s also up significantly are used-car transaction prices on the retail side.

Edmunds said that consumers paid an average of $19,227 for a used vehicle in the second quarter, the highest ever for Q2.  And it’s the older vehicles where the wallet wallop is happening.

Edmunds noted that vehicles 6 years and older have improved their retention, which is driving this surge. For instance, the retention of original MSRP on a 10-year-car in 2012 was 21.1 percent, on average.

It was at 26.4 percent in the second quarter, Edmunds said.

A 10-year-old midsize SUV had 16 percent retention in 2012; it’s now 32.5 percent.

“Vehicle sales reached historic lows during the recession, and now fewer consumers have an older trade-in when they buy a new vehicle,” said Ivan Drury, Edmunds senior manager of industry analysis, in a news release.

“It’s the basic law of supply and demand. People still want to buy affordable older cars, but there simply aren't as many out there,” he said.

Conversely, deprecation has escalated among later-model vehicles. Retention on 1-year-old used vehicles has slid from 76.6 percent in Q2 2012 to 70.9 percent in the second quarter of this year, Edmunds said, with the impact being felt the most in car segments. 

This late-model decline largely has been driven by heavy off-lease supply and incentive hikes. And, Drury said, an uptick in leasing.

“The surge in popularity of leasing has led to a more disposable mentality about personal vehicles, which has taken a toll on the values of newer used cars,” he said.

The difference in price on a 1- and 10-year-old car has gone from 55.5 percent to 44.4 percent over the past five years, meaning a less affordable used-car market overall, Edmunds said.

But again, the company emphasizes that retail sales are still strong.

In fact, shifting back to the Cox Automotive analysis, analysts are expecting a 3-percent lift in full-year used-car sales thanks in part to demand for replacement vehicles in southeast Texas following Hurricane Harvey.

“The dynamics of the used market are completely different now than they were five years ago, and we don't see this trend reversing anytime soon,” said Drury, the Edmunds analyst.

“Leasing grew steadily until late last year, so the near-new vehicle stock will continue to grow, and it's going to take time to replenish the supply of older used models,” he said. “It’s good news for those who can afford it, but for shoppers who need to find reliable transportation on a budget, this is a challenging scenario.”


Used-car sales picture for August, July

CARY, N.C. - 

There are likely to be fewer used-car sales this month than there were in July, but the seasonally adjusted annualized rate should stay in the neighborhood of 39 million units.

Edmunds released a forecast Thursday projecting 3.3 million used-car sales for August, which would be down from 3.4 million in July. The resulting used-car SAAR for August would be 39.0 million, down from 39.2 million in July, Edmunds said.

In a separate analysis on the used-car market, CompetitorPro found that average used-car sales per store at franchised dealerships in its database for July was 58.4 vehicles, with average days to sell at 35.3. The company had total used sales for franchised dealerships in July at 1.13 million.

For independent dealerships, the firm found that average used-car sales per store within its database was 185.3 in July, with average days to sell at 16.7.  Total used sales among independents was 166,400.

The data is based on internal VIN analysis on dealership websites (which are publicly accessible) by CompetitorPro. There were 19,307 franchised dealers in July’s data set and 898 independent dealers.

CompetitorPro counts individual franchises as separate dealerships.

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