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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.

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.” 

Off-Rental Prices Take a Hit at Auction

Wholesale used vehicle prices have been flat in the first 15 days of August.

Manheim economist Tom Webb reported that  the Manheim Used Vehicle Value Index finished July with  a reading of 124.1 in July. The Index adjust wholesale prices for mix, mileage and seasonality.

Given that seasonally adjusted prices were declining at this point last year, the Index’s year-over-year change moved from negative-0.1 percent in June to 1.1 percent in July.

"The continued strength in wholesale pricing reflects a retail used vehicle market where dealers are enjoying higher throughput, achieving ever-greater efficiencies, and still growing F&I income," Webb said.

It was a different story. without the same adjustments, however.

Tom Kontos, ADESA's executive vice president of analytical services,  reports average wholesale used vehicle prices fell significantly on a month-over-month basis, falling below $10,000 for the first time this year. July saw the third consecutive month of decline.

"Supply growth continues to put downward pressure on prices despite strong demand driven by relatively high levels of retail used vehicle sales, especially for certified pre-owned vehicles." Kontos said.

According to ADESA Analytical Services’ monthly analysis of Wholesale Used Vehicle Prices By Market Segment, wholesale used vehicle prices in July averaged $9,878 – down 3.3 percent compared to June, although up 1.4 percent relative to July 2014.

While Kontos and Webb differ on the overall market, they agree on the winners and losers.

Both report that increased supply has driven down the price of off-rental units.

 On a year-over-year basis, prices were down 4.3 percent year-over-year on an adjusted basis, Webb said, and were down 11.7 percent on an unadjusted basis. The average price of an off-rental unit slipped below $14,000 for the first time since October 2011.

Meanwhile, low fuel prices are benefitting pick-up truck values, which rose 2.2 percent month-over -month, Kontos said.

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.” 

Wholesale Markets - New York

Julie A. Quinn, general manager, Rochester’s Central Auto Auction, Rochester, N.Y.: 

“Sales are going very well.

“The beginning of July, with the holiday, was a little slow, but we always have more than 400 cars and we sell half of them.

“We have the ability to run six lanes, but we run five. 

“We have a pretty good relationship with our dealers. They are telling us they are selling a lot of cars.

“The economy in the Rochester area is pretty steady. We just had a CarMax open here.

“We keep seeing dealers expanding, so business must be pretty good. Vision (a large local group) has put in a couple of new franchises. Seeing the market grow is always a good thing for us.

“A majority of our units are dealer trades. We have a couple of dealers who come in and out. They might try running their own sales. But they always come back.

“There is fluctuation. Some dealers come every week with 100 cars and others come and go.

“Repos have been a little slower.

“We get dealers from Buffalo to Syracuse to Pennsylvania. We even have a couple of bidders who come from Texas. They have been coming for 15 years. 

“We have seen an increase in dealers from the
Syracuse area.

 “There is a lot of demand for Toyotas and Hondas.

“It’s hard to say how the rest of the summer will go.  There are so many factors. 

“Our customers are very loyal. There’s always a core group that comes. 

“Even if attendance drops, the sales don’t. The ones who come are the ones
who buy.

“We’re very small and customer friendly. We offer competitive fees. That’s an advantage of being small.”