Used Car NewsUsed Car News

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Scandal Hits VW's Residuals

One of the biggest concerns surrounding the Volkswagen emissions scandal is how it will affect the company's resale values.

Volkswagen grounded all its diesel vehicles, so very few are running through the lanes. Those that do show up at auction are bringing lower amounts, said Eric Ibara of Kelley Blue Book.

That seems mostly because these are vehicles the owners want to get rid of quickly rather than wait to see how Volkswagen fixes the situation.

The incident most experts compare this event to is Toyota's recall for unintended acceleration. The brand suffered a small dip in values when the story first broke, but recovered quickly.

The same could happen with Volkswagen.

Volkswagen's remedy for the situation is to have the vehicle refitted, but the company has not released details on what that entails.

One element of this that makes predicting results difficult is that unlike other recalls, Ibarra said, is there was no threat to the safety of the driver.

The biggest issue for Volkswagen is the diesel line had become something that sets the brand apart. Ibarra said this scandal and its solution could turn consumers away from this segment.

There might also be legal fall out. Toyota had to pay out more than a billion dollars to settle claims for lost resale value for its sudden acceleration issues.

Wholesale Markets Chattanooga

TENNESSEE

Todd Rea, general manager, Dealers Auto Auction of Chattanooga, Chattanooga, Tenn.:

“David Andrews owns this auction and he bought it in February 2014. The auction has been here since 1995-1996.

“We actually have an eight-lane facility. We utilize five lanes.

“We run about 650 cars per week. I would say our volumes are up about 15 percent, in that range.

“Our ‘sold’ numbers are about 20 percent higher from this time last year.

“We’ll average about 52 percent (conversion rates).

“We’ve just gone out and really busted it. We’ve tried to find new business and get involved in the community as far as working with our used- and new-car dealers in the area, along with our local finance companies. We really try to concentrate on giving back and working with our dealer base.

“Per week, we draw
250 dealers.

 “We have a small public sale that we offer on Tuesday nights. It’s mostly used-car dealers who attend that sale. 

“We run vehicles from the Tennessee Valley Authority once a month. Then three times a year, we’ll run local government vehicles – police departments, sheriff’s departments, narcotics
division, and drug seizures – about three times a year.

“The Tennessee Valley Authority vehicles could be anything from the vehicles they have in service for their employees to ¾-ton trucks or box trucks.

“The local government cars could be anything from police cars to the car the mayor might drive.

“We have a TVA/local government sale coming up Oct.1 and we expect to have more than 200 units.

“More than 95 percent of our volume is (dealer vehicles). But we also sell bank cars, repossessions, etc.

“We run 75 to 100 in-op cars once a month.

“For online sales, we are associated with Auction Pipeline and with Liquid Motors which utilizes OVE.com, SmartAuction and OpenLane. It definitely is still a growing part of our business.

“We also do lots of detail business.

“Our average price coming through the lanes is $4,900 and I think that’s up from last year.

“We sell a lot of off-lease vehicles from GE Fleet
Services, Element and ARI.”

Wholesale Markets Pa.

L. Todd Briggs, co- owner/general manager, Greater Erie Auto Auction, Fairview, Pa.:

“We’ve been in business just over 11 years. We have five lanes. Right now, we’re running four lanes even on days when our consignment is heavier. It’s always good to keep the lanes tight.

“We’ve been running be- tween 400 and 500 units. Two or three times we’ve been just up over 500.

“Our commercial accounts have increased some. This past week we were with- in four or five cars of 100. For us, that’s a good run. We’re getting more banks and credit unions involved.

Credit Acceptance is a new account for us. So that’s a big national account. We also have Element and some others. Maybe by the fall or winter we’ll have one or two more aboard. We’re making traction.

“We’ve got a special sale on Aug. 18. It’s a special trucks and SUV sale. It will start just after our normal start time, but they will be in a lane by themselves.

“Our consignment has been looking good. (Sales percentages) have been in the 54 to 56 percent range, which I think is fairly re- spectable this time of year.

“We get a lot of support out of the Buffalo area, which is 100 miles away. We also get some from Ohio. We’re 30 miles from the New York state line and 16 miles from the Ohio line. Probably 70 to 80 percent of our buyers are from the Cleveland area and east.

“We’ll draw from 180 to 225 dealers.

“We got a lot of dealer trades from new-car stores.

Average sale prices are probably in the $4,000 area. The fleet-lease stuff is in the $12,000 to $18,000 range, but there are not enough of those to bring the average way up.

“We just had a quarterly heavy duty truck and equip- ment sale. It’s a mix of light- duty medium-duty and heavy-duty trucks and trail- ers. We ran 102 and sold 62 pieces on sale day. We prob- ably put eight or 10 (sales) together since the sale.

“This summer I did an in- terview with the local news- paper because (the state) took a bridge out across I-90 right near us. I know it had an impact on us. We’ve actually made our own signs to help (direct traffic) to our auction.

“The bridge is supposed to be open (by press time). So we’re having two weeks of dealer appreciation be- ginning Sept. 1 celebrating the new bridge being open. We’ll have a chicken barbe- cue, lots of prizes like a John Deere riding lawnmower.” 

Rental Cars Underperform at Auction

Wholesale used vehicle prices rose in first 15 days of September, according to Manheim chief economist Tom Webb.

Those prices are adjusted for mix, mileage and seasonality.

The Manheim Used Vehicle Value Index reached 124.3 in August, an increase of 2.1 percent from a year ago.


The stability of wholesale pricing, in the face of rising volumes, stands in stark – and welcome – contrast to the volatility in financial markets,
 Webb said.

Tom Kontos, ADESA's executive vice president of industry analysis,  presents a different picture.

Using different adjustments, Kontos reports that wholesale prices in August were lower than they were a year ago,

"We now see a clearer picture of the downward pressure that supply growth is putting on prices," he said.

One area where Webb and Kontos are in complete agreement is the weakness of the off-rental segment.

 Webb said a straight average of auction prices for rental risk units bumped up from July’s low, but remained below 2013 and 2014 levels.

Kontos attributes some of the weakness to higher new-car incentives, which are applying pressure on cars at auction. Trucks are holding up better thanks to lower fuel costs.

Whole Markets Pa.

L. Todd Briggs, co- owner/general manager, Greater Erie Auto Auction, Fairview, Pa.:

“We’ve been in business just over 11 years. We have five lanes. Right now, we’re running four lanes even on days when our consignment is heavier. It’s always good to keep the lanes tight.

“We’ve been running be- tween 400 and 500 units. Two or three times we’ve been just up over 500.

“Our commercial accounts have increased some. This past week we were with- in four or five cars of 100. For us, that’s a good run. We’re getting more banks and credit unions involved.

Credit Acceptance is a new account for us. So that’s a big national account. We also have Element and some others. Maybe by the fall or winter we’ll have one or two more aboard. We’re making traction.

“We’ve got a special sale on Aug. 18. It’s a special trucks and SUV sale. It will start just after our normal start time, but they will be in a lane by themselves.

“Our consignment has been looking good. (Sales percentages) have been in the 54 to 56 percent range, which I think is fairly re- spectable this time of year.

“We get a lot of support out of the Buffalo area, which is 100 miles away. We also get some from Ohio. We’re 30 miles from the New York state line and 16 miles from the Ohio line. Probably 70 to 80 percent of our buyers are from the Cleveland area and east.

“We’ll draw from 180 to 225 dealers.

“We got a lot of dealer trades from new-car stores.

Average sale prices are probably in the $4,000 area. The fleet-lease stuff is in the $12,000 to $18,000 range, but there are not enough of those to bring the average way up.

“We just had a quarterly heavy duty truck and equip- ment sale. It’s a mix of light- duty medium-duty and heavy-duty trucks and trail- ers. We ran 102 and sold 62 pieces on sale day. We prob- ably put eight or 10 (sales) together since the sale.

“This summer I did an in- terview with the local news- paper because (the state) took a bridge out across I-90 right near us. I know it had an impact on us. We’ve actually made our own signs to help (direct traffic) to our auction.

“The bridge is supposed to be open (by press time). So we’re having two weeks of dealer appreciation be- ginning Sept. 1 celebrating the new bridge being open. We’ll have a chicken barbe- cue, lots of prizes like a John Deere riding lawnmower.”