2010 UCMR
Executive Summary
2010 Used Car Market Report
The 15th edition of Manheim Consulting's Used Car Market Report (UCMR) explores the economic and industry trends that specifically influenced the demand for and supply of used vehicles in 2009. It was an unprecedented year during which used vehicle prices soared as consignors had fewer vehicles to remarket. Meanwhile more franchised dealers turned to used vehicles to support their stores and independent dealers fine-tuned their inventory to emphasize faster turnover. Dealers often repeated that finding the exact models they needed took more effort than in the past.
Throughout the report, you will find in-depth analysis of topics ranging from Tom Webb's insightful overview of the economy and how the present recovery will differ from prior expansions to discussions of major vehicle consignors and dealers.
The transformation of the remarketing industry is highlighted in a special section. This industry facilitates wholesale used vehicle transactions. How and where those transactions take place has been gradually shifting online. In 2009, a host of factors coalesced to accelerate the rate of adoption of online portals and online channels. The Report explores the emergence of the new remarketing paradigm best described by Manheim's motto "Anytime+Anywhere".
This year the UCMR has tapped Manheim's vast database along with that of AutoTrader.com to understand trends in the market throughout 2009. By analyzing blocks of data over time Manheim Consulting analysts have been able to understand the effects of specific economic and business events on both the retail and wholesale markets.
A critical focus of the 2009 report is the state of the auto retail industry and the conditions that impacted the profitability of dealers. Their resilience in overcoming weaker sales and challenging credit markets often included a greater focus on selling used vehicles.
The international discussion focused on the similarities in used vehicle activity in major global markets. The data generated in wholesale vehicle auctions around the world demonstrated the efficiency of the markets in responding to economic forces.
Section Highlights
The Year in Review
Tom Webb analyzes the economic forces that shaped new and used vehicle demand in 2009 and looks ahead to how they will influence vehicle sales in the coming years. Vehicle demand will rebound at a slower pace than in the past as businesses and consumers due to tighter and more expensive credit, diminished household wealth and relatively high unemployment.
Used Vehicles: A Dynamic Marketplace
The values of used vehicles in the wholesale market reflect overall wholesale supply and retail demand as well as factors specific to individual makes and models. Used vehicle demand fell to its lowest level in 25 years in 2009, but because the supply of used vehicles also dropped wholesale values rebounded from 2008 lows.
Remarketing, Past, Present and Future
For more than 70 years the remarketing industry has enabled buyers and sellers of used vehicles to transact in a fair and open environment. Although the auction process has been and will remain the most effective way to remarket used vehicles, technology, data-driven buying and selling strategies and increased dealer confidence are enabling 24/7 auctions that give dealers immediate access to ten of thousands of vehicles.
Dealers
A record number of franchised and independent dealers closed their businesses in 2009. Those dealers that were able to adjust costs and increase inventory turnover saw improving profits by the second half of the year. Dealers are the major suppliers of used vehicles in the wholesale market, but with fewer trade-ins to sell, their share of auction volume declined.
Rental
The rental industry confronted higher fleet expense and lower demand by reducing vehicle purchases and running units longer. The economics of the rental industry dictate that risk units stay in service more than a year and as long as 40,000 to 45,000 miles. As a result the supply of rental units in the auctions fell by double digits.
Commercial and Government Fleets
Fleet managers were hard pressed to respond fast enough to layoffs and reduced budgets. Fleets bought substantially fewer vehicles, extended service lives of existing models and focused on matching the right vehicle to each task and driver. De-fleeting brought more fleet units to auction in 2009.
Leasing
In the first half of 2009 lease originations tumbled as some finance companies were forced to withdraw from the market. By the second half, leases were again available on most brands. The volume of off lease units in the next few years, which are primarily remarketed to grounding dealers through closed online channels, will be declining.
Finance Companies
Repossessions increased in 2008 and again in 2009 as a result of rising unemployment and over-stretched consumers. Since repossessions typically occur early in the life of a loan, fewer vehicle sales in 2009 and tougher credit standards are likely to mean fewer repossessions in 2010.
International
Used vehicle values soared in major foreign markets in 2009 paralleling the US experience. Consumer demand for affordable transportation shifted some shoppers to used vehicles as the supply was constrained. Exports to Russia and Mexico declined while volume to other markets remained stable.
Salvage
Although precise statistics are not available, it appears that salvage auction volume declined by single digits in 2009. Prices for both repairable and dismantled units lagged the rebound in whole cars due to more cautious demand.
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