Auction unit sales volume expected to top 10 million in 2017

Action from ADESA Chicago's grand opening sale in March. Photo by Joe Overby.
DETROIT  - 

The auto auction industry will set a new sales record of more than 10 million vehicles this year, auction experts predict. That’s up from 9.8 million in 2016.

Ira Silver, National Auto Auction Association chief economist, believes 10 million sales for the industry is on target. He attributes the growth to an increase in the commercial consignment segment, which is made up of off-lease vehicles and retired rental and fleet vehicles.

Conversely, sales of dealer consignment vehicles are down, he noted.

“We’re seeing strong growth in the order of around 10 percent in commercial consignment, while dealer consignment is declining somewhat,” Silver said. “Dealer consignment is closely related to current new (vehicle) sales and new sales for the first half of the year are down slightly from last year.

“When someone buys a new car they typically trade-in an older car and some portion of those cars will go through the auction. Until this year, dealer consignment had been growing since the end of the recession.”

Tom Kontos, KAR Auction Services Inc. chief economist, said his analysis of AuctionNet data pegs auction sales up 2 percent for the first half of 2017 compared to the same period last year.

But sales would have been higher had some vehicles not been sidelined because of manufacturer recalls, he opined.

“They are sitting in inventory at auctions but they are not being sold,” Kontos said. “It’s enough cars that the percentage would have been higher than 2 percent.’’

He also believes the industry is tracking to sell “more than 10 million” units this year.

More cars, but just barely

Industrywide, more cars than trucks have been sold at auction so far this year, but just barely, Kontos said.

Through June, cars represent 50.8 percent of vehicles sold at auction versus 53.9 percent for the year in 2015.

When combined, compact and midsize cars represented 66.4 percent of the cars sold in the first half of 2017 versus a combined total of 63.0 percent for the year in 2015.

Grace Huang, senior vice president of inventory services at Manheim, said cars were about 51.5 percent of the vehicles being sold at Manheim. Midsize cars at 20 percent of the vehicles sold and SUVs at 31.6 percent were the two largest vehicle segments, Huang said.

“For us, the most popular (model) year is 2014 because that was the peak of leasing after the downturn,” she added.

Jonathan Smoke, Cox Automotive chief economist, said the company’s analysis of industrywide auction data indicates that much of the 500,000 to 600,000 off-lease unit volume increase expected this year occurred in late 2016 and early 2017 as a result of manufacturer and dealer pull-ahead programs and efforts.

When cars “like the Nissan Altima and Hyundai Sonata are depreciating at lower than what is considered to be normal, it’s because earlier in the year they were depreciating more significantly,” said Smoke during Cox Automotive’s quarterly conference call on July 10.

Same industry, different view

Just as the nation’s largest auction companies offer a big-picture look at the auction industry, smaller auction companies and independent auctions offer a different view.

“In Texas, we’re pickup and SUV country, so predominantly, that’s what you’re going to see at auction, especially around Austin, San Antonio and places like that,” said John Swofford, vice president at America’s Auto Auction which owns 21 auction locations around the country.

Dealer consignment vehicles make up 75 percent to 80 percent of the sales at the company’s four Texas locations under Swofford’s watch. He is also in charge of America’s Auto Auction locations in Tulsa, Okla., and Baton Rouge, La.

“In Dallas, it may be a little bit different because of the population base and the amount of highline vehicles there. We’re simply dealing with what was retailed five to seven years ago. Compact cars aren’t a big retail item in Texas.”

George Pero, general manager at Corry Auto Dealers Exchange, which was acquired by the XLerate Group in March, said he is seeing an increase in off-lease and commercial fleet vehicle volumes at the Corry, Pa., location.

“We’re seeing an influx of SUVs from the off-rental market,” too, Pero said.

CADE sold about 10,500 vehicles at auction in 2016 and expects an eight to 10 percent sales increase this year, Pero said. XLerate owns 14 physical and mobile auctions in eight states.

More repos coming

In the first six months, sales of both fleet-lease and dealer consignment units were down “a little bit” and dealer consignment units were in “rougher” condition, at Carolina Auto Auction, in Williamston, S.C., said the site’s general manager, Eric Autenrieth.

Autenrieth said he has also seen a downturn in sales of repossessed vehicles because consumers “got caught up” with their car payments during income tax refund season.

He said there is typically a three-month lag between loan default and vehicles making their way to auction. “I think it’s following the normal trends we’ll see (repo sales) climb as we hit the fall months,” he said.

Carolina Auto Auction specializes in sales of fleet-lease vehicles, retired rental vehicles, repossessed vehicles and dealer consignment units.

About 1,000 to 1,200 vehicles roll through its lanes each week, Autenrieth said.

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