The State of Remarketing in 2019
The used market so far in 2019 has enjoyed strong wholesale values; a healthy supply of young, low-mileage, vehicles returning to market; and plenty of demand for these vehicles. Combined, these factors have created an environment of relatively low levels of depreciation for most vehicle segments.
The used market so far in 2019 has enjoyed strong wholesale values; a healthy supply of young, low-mileage, vehicles returning to market; and plenty of demand for these vehicles.
Combined, these factors have created an environment of relatively low levels of depreciation for most vehicle segments.
The average 12-month depreciation for the overall market, as of July 2019, is 12.9%, according to Black Book.
Depreciation for Fleet-Segment Vehicles
Full-size pickup trucks have experienced the lowest depreciation among the vehicle segments that Black Book tracks.
Over the 12-month period ending in July 2019, average full-size pickup wholesale values declined 5.2%, a rate well below the 12.9% industry average.
The price of these pickups at retail have been one of the biggest contributors to these higher values, as the average price for a new pickup these days regularly exceeds $60,000, noted Anil Goyal, EVP of operations at Black Book.
The full-size van segment also depreciated at a low rate over that same time period. The 7.8% decline in value over those same 12 months is also well below the 12.9% average.
The success of this segment, according to Goyal, is largely related to how businesses are doing well in the current economy.
“[The strength of vans] is directly related to the small business economic sector doing well,” said Goyal. “There’s strong demand for these cargo vans, as the work van continues to be the workhorse for every day needs.”
Compact crossovers are another segment that has performed better than the overall market. Average depreciation for compact crossovers over the 12-month period was 12.2%. The performance of this segment is interesting due to the state of the overall automotive market. Crossovers/SUVs have become the darling of the new-vehicle market, as fervent consumer demand for these vehicles have been met with manufacturers rushing to release new crossovers/SUVs into the market.
While the segment is currently performing well, there is cause for concern for this segment, according to Goyal and Jonathan Smoke, chief economist at Cox Automotive.
With a 70/30 split in new-vehicle sales market share — truck segment in the majority and car segment in the minority — the mix of vehicles returning to the used market over the next couple of years will be largely skewed toward vehicles such as SUVs and crossovers. With a large influx of SUVs and crossovers returning to market, supply is expected to exceed demand, resulting in weaker wholesale values.
The midsize sedan segment also saw better-than-average depreciation, 12.7%, over the 12-month period.
Crossovers/SUVs vs. Sedans
The relationship between these last two segments, crossovers/SUVs and sedans, in the used market is one that is worth exploring in more detail.
Smoke noted that if you looked back just a few years back, sedan sales comprised 55% of total vehicle sales at Manheim auctions.
One year ago, sedan sales comprised 50% of overall sales at Manheim auctions.
So far this year, sedans have comprised 48% of Manheim’s sales.
This trend, he noted, is likely to continue as sedan sales are continuing to wane in the new market, meaning there will be fewer of these vehicles eventually returning to market.
“You’re seeing fewer sedans in the new and used market and you’re seeing record numbers of SUV supply in new and used markets,” said Smoke. “If this trend continues, you can expect pricing to be favorable or stable for sedans in the used market.”
As demand for sedans remains consistent, but supply in coming years shrinks, values for these segments will improve, as consignors will be able to warrant better values with the limited supply.
Buyers on the used side tend to want more affordable vehicles, and these midsize — and smaller — sedans provide that affordable entry point for vehicles.
There’s also a scenario where demand for sedans grows, if the ride-hailing industry continues to grow. Sedans are often the preferred vehicle for ride-hailing services due to lower acquisition costs and better fuel efficiency, and in a post Uber/Lyft IPO world, an increasing amount of people may be looking for these types of vehicles as they enter the ride-hailing economy.
“When ride-sharing took off, many talked about how ride-share may lower personal ownership of vehicles, but it has actually helped ownership,” said Goyal. “Many ride-share drivers are subsidizing monthly car payments with Uber and Lyft earnings.”
Meanwhile, there is some cause for concern for certain crossover segments, such as the subcompact crossover segment.
Smoke noted that if there is one segment to worry about in the next couple of years, it’s this one.
Subcompact crossover depreciation has not been abnormally high this year — the balance between supply and demand for this segment is currently healthy enough to maintain healthy depreciation levels — but if manufacturers continue to focus on the growth of production of these types of vehicles, it’s very likely that the industry will reach a saturation point that will undoubtedly lead to more discounts and incentives on these units, and eventually result in a hit to the segment’s used values, Smoke noted.
FLEET MANAGEMENT AUDIT
Fleet management is the use of a set of vehicles in order to provide services to a third-party, or to perform a task for our organization, in the most efficient and productive manner with a determined level of service and cost.
Fleet management activities are shown in the following graph 1:
Graph 1: fleet management activities
The proposal audit analyses and assesses all fleet management activities shown in the graph 1, and its main goals are:
- Know the overall status of the fleet management activities
- Provide the analysis, the assessment, the advice, the suggestions and the actions to take in order to cut costs and increase the efficiency and efficacy of the fleet management activities
With the information obtained, we’ll elaborate a report that holds the overall status of the fleet management as well as the suggestions, recommendations and the measures to take in order to cut costs and optimize the fleet management activities.
CLICK ON THE FOLLOWING LINK TO DOWNLOAD THE PROPOSED FLEET MANAGEMENT AUDIT:
José Miguel Fernández Gómez