Kontos Kommentary – May 2013

Kontos Kommentary – May 2013

 

Wholesale Price Data by Model Class – May 2013

  • According to ADESA Analytical Services, wholesale used vehicle prices in May averaged $9,811
  • Down 2.8% from previous month and 4.5% relative to May 2012
  • 4.5% year-over-year decline matched April’s decline
 

What’s Next for a Softening Used Vehicle Market?

Here’s a few thoughts on remarketing trends after reading the recent Manheim Used Vehicle Value Index and Galves Market Conditions reports:

1. The market is returning to a level of normalcy not seen for a while – it wasn’t as hard of a fall last month, but the decline in pricing has been in the works for at least four months.

2. We may start seeing more of a separation between new vehicles and the price of same model used vehicles. New vehicle dealers might have more of a challenge to battle competitive comparable new models that offer even sweeter rebates and incentives to buyers.

3. Later model used cars are feeling the pinch more than older models from the new vehicle incentive wars.

4. Pickup trucks are still very strong, and that should last through the year unless gasoline prices spike up.

5. It’s going to require harder work this year for used vehicles to be nearly as profitable as they were the previous two years – certified pre-owned vehicle and targeting specific makes and models based on regional market conditions should be more relevant this year.

 

FirstLook Digs into Pricing Formulas for Pre-Owned Cars

In the remarketing side of the business, there’s a balance point dealers are always working on achieving deter­min­ing which cars are “com­mod­ity cars” and which are “gross cars.” Pricing is the key and that’s fluctuating by area markets and their supply of pre-owned models that might be getting strong demand.

Steve Miner of FirstLook examined four parts of making the pricing process work for remarketers.

1. Show me the data:
Looking at key data from current market inventory and historical market data – items like Market Days Supply and how the listings and their pricing trends are going in your market.

2. Unit cost does not mat­ter: 
In this day of trans­par­ent data from the inter­net, cus­tomers don’t care what you paid for the car. Making the right moves for gross margins and deciding whether or not you charge for reconditioning come into play.

3. Not all used cars are cre­ated equal: 
Here’s where the classic question of determining whether “commodity cars” or “gross cars” determine pricing.

4. Price to sell: 
The benchmark on the commodity side becomes “probability of sale,” while maximizing gross margins in those spaces where there’s not much competition for a particular make and model.