UCN
Used Car News
usedcarnews
5/18/2020
Economists Report Bright Spots in Industry By Jeffrey Bellant
karglobal.com
IN THIS ISSUE:
• LEGAL TIPS • CASH FLOW
Photos by Jeffrey Bellant BRIGHT SPOTS: Industry economists Tom Kontos (left) of KAR Global Services, and Jonathan Smoke of Cox Automotive, reported some positive developments in the industry.
seemed to accelerate pretty dramatically in the third to last week of April.” Smoke said the used-car market seems to be recovering strongly. Looking at credit applications from Dealertrack, Smoke compared the last week of April to the same period in 2019 among more than 200 markets. The map that tracks this category shows 125 “green” markets in the last week of April. These markets, collectively, were up 5 percent on a year-over-year basis, Smoke said. “The apps tell us there were more vehicle sales in those markets (in the last week of April) compared to the same week last year. (That’s) pretty incredible considering the road we’ve been on,” he said. “In total, we estimate that 91 markets out of 207 that we can measure were actually up in total vehicle sales (in the last week of April) compared to the same period last year.” Smoke predicts that trend will continue. Kontos said the rate of decline in retail prices isn’t as swift as the decline in wholesale values.
Wholesale conversion rates dropped to 34 percent at their lowest rates, he said. “We’ve gotten back to about a 55 percent conversion rate,” Kontos said. “It’s still a far cry pre-coronavirus where the peak was at 75 percent as early March was looking like a very strong spring market.” The industry is “on the way back” in that area. Some of the supply dynamics, including fleet/lease, repossessions and rental units, will be another issue going forward. There is a glut of off-rental units as companies de-fleeted in the wake of COVID-19 due to travel restrictions and stay-at-home orders. “Rental vehicle demand has dropped severely,” Kontos said. He said there is a decrease in the upstream sales of off-lease units, where typically half or more were sold to the grounding dealer, nongrounding dealer or upstream while the vehicle was still on the dealer lot. As a result, there is a build-up of off-lease supply at the physical auctions. Meanwhile, a hold on repossessions has hurt repo supply.
Rush - Dated Material
• CREDIT REPORTING
There is some positive news in the auto industry, despite the brutal economic downturn from COVID-19, according to economists speaking during a webinar from the International Automotive Remarketers Alliance. Cox Automotive Chief Economist Jonathan Smoke and Tom Kontos, chief economist for KAR Global Services, discussed trends and numbers during the webinar. “There’s good data in the auto market that we’re clearly seeing signs of auto sales starting to recover as dealers are able to open up across the country” Smoke said. Cox Automotive’s Dealertrack was used to build a same-store methodology tracing retail sales over 1,000 rooftops on a year-to-year basis. “March actually started out strong for new vehicle sales,” Smoke said. “But as the pandemic unfolded, we started to see steep declines. We estimate that retail sales were down almost 70 percent at the very end of March. “The good news is, that appears to be the bottom.” Since then, the industry has seen “very steady progress and improvement day-today, and week-to-week,” Smoke said in the May 8 webinar. The used-car market was even stronger than the new-car market at the beginning of March, according to Dealertrack. “It was looking to be, potentially, one of the best used-vehicle markets that we would have seen,” Smoke said. As the pandemic set in, the numbers fell, accelerated and bottomed out at the very beginning of April, he said. “Since then we’ve been seeing a recovery,” he said. “That recovery
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