Carvana has launched CarvanaACCESS, a direct-purchase platform that gives independent and franchised dealers the ability to buy wholesale vehicles from Carvana. As consumer trade-ins and other wholesale vehicles are processed at Carvana locations across the country, they will be made available on CarvanaACCESS.com in a “timed bid” online auction enabled through a partnership with Manheim Digital. All vehicles on CarvanaACCESS are presented with full condition information and 360-degree imagery, ensuring buyers are informed and armed with detailed information in making their bidding and buying decisions.

“This direct purchase platform unlocks the full potential of Carvana’s capabilities matched with technology modules from Manheim Digital, creating a whole new way to buy wholesale, directly from Carvana. We look forward to working with even more wholesale customers to provide them with our incredibly diverse inventory and national network,” said Scott Wood, senior director of wholesale operations at Carvana.

Cox Automotive’s Mid-Year Review brought mixed news, but with a rosier outlook for used cars as we move later into the summer and fall.

Chief Economist Jonathan Smoke started with a high-level view of the economy and, not surprisingly, it wasn’t pretty.

“Obviously, the COVID-19 pandemic has produced a significant recession,” Smoke said.

The economy felt a 5-percent decline in Q1, even though the pandemic only really affected the second half of March, he said.

“We are forecasting that the second quarter, when all is said and done, will be down 39 percent on an annualized basis,” Smoke said. “That is unprecedented in the quarterly GDP data.”

That led to increase unemployment from 3.6 percent in May 2019, to 13.3 percent this past May.

However, consumer sentiment and confidence could have been worse,” said Smoke, who credits the economic stimulus payments as one reason for that.

Wages and disposable income were stronger than expected, he said, but the numbers don’t tell the complete story.

“The wage looks so strong because the low-wage jobs were disproportionately included in the job losses, so that the remaining employees tended to be at higher wages,” Smoke said.

The disposable income may be due to the stimulus checks, combined with the enhanced unemployment payments included with the overall stimulus.

Smoke said data is still positive in the areas of auto finance, interest rates, borrowing costs and mobility costs.

Mobility costs have dropped because of the lower price of gasoline, as well as the fact that consumers are not driving as much, he said.

However, gas and oil prices are now creeping back up.

In terms of dealer sentiment, the view is that the economy was weak as of April and May. Independents have a more negative view of the market than new-car dealers, Smoke said.

The biggest surprise coming out of the quarterly data for Smoke was that more franchise dealers than not are optimistic about the next three months.

Independents collectively expect the markets to be weak, Smoke said.

But he expects that by the third quarter, sentiment should be up for both new- and used-car dealers.

Used car sale recovery
Cox Automotive's used car sale recovery index

“The vast majority of economists – 69 percent –­ and that includes myself,” Smoke said. “believe that we’re going to see a Nike swoosh-shaped recovery.”

Despite sentiment, the data show there is – like the new-car market – a recovery in the used-car market, said Zo Rahim, manager of economic & industry insights.

He said the used market has “improved greatly” since the shutdowns in April.

“Though the market is still down year-over year,” Rahim said, “you can still expect continued recovery in the used-car market as we navigate the second half of 2020.”

The Manheim Index gained 9 percent in May and an estimated 6.6 percent by mid-June, Rahim said.

Retail prices remained fairly stable, even has wholesale prices dipped during the downturn. But wholesale prices were recovering in June for three-year-old units.

Both retail and wholesale supply are dropping, however.

On April 8, based on a rolling seven-day estimate of used retail days-supply, it peaked at 118 days.

“Normal used vehicle supply is about 44 days,” Rahim said. “The most recent seven-day estimate of used retail supply is at 30 days.

“We estimate that wholesale supply peaked on 149 days on April 9, when normal supply is just at 23 days. It was down to 27 days for the most recent seven-day period.”

Rahim said wholesale supply may be below normal by July 4. However, he sees “waves of supply coming in later this summer and fall from lease returns, repossessions and even rental car companies could lead to an environment where supplies during that period are higher than normal.

“CPO sales decreased 6 percent year-over-year in May, but were up 87 percent month over month,” Rahim said. “It’s just another sign of the recovery in sales being led by demand.

Younger used cars are expected to have strong interest the rest of the year.

Optimism is on the rise with franchise dealers
Optimism is on the rise with franchise dealers        photo credit Ildar Sagdejev

Senior Economist Charlie Chesbrough said that before COVID-19, the bottom of the new-car market this year hit the week of April 20, though based on year-over-year data, it was probably closer to the end of March.

 

“Since then, the recovery has begun,” Chesbrough said.

Current data shows the used market is up at last check, while the new-car market was lagging, he said.

But on the new-car side, seasonably-adjusted annual selling rates hit rock bottom in April with a sales pace of about 8.7 million – following 2019’s 17 million.

That figure is the lowest going back as far as the industry has measured, Chesbrough said.

He expects the rate for annual new-car sales will be 12.6 million for June.

Cars have done worse than trucks, with cars down about 40 percent and trucks only down 25 percent.

Retail activity is better among new cars, with fleet sales down 28 percent.

“Leasing activity is also down,” Chesbrough said. “It fell to 20 percent (of sales) by April.”

The 0-percent deals had a big impact on that

“On the optimistic side (for new-car sales), the worst of the crisis may be behind us,” Chesbrough said.

Among manufacturers, Hyundai and Kia seem to be the early winners. Nissan, meanwhile, is having the toughest year, Chesbrough said, in some part due to its aging products and reliance on fleet sales.

Chesbrough warns that sales numbers varied by states because of shutdowns over COVID-19. Texas and Florida won bigger market share because of the closings in the Northeast.

Florida and Texas are seeing infections spike while states that had lost market share during the worst of the crisis are not bouncing back, Chesbrough said.

Wholesale supply may be below normal by July 4
Wholesale supply may be below normal by July 4       photo credit Helgi Halldórsson

One concern is low inventory, which has dropped to a 71 day supply, below where it was at this time last year, Chesbrough said.

“This number could go down even further,” he said.

Michelle Krebs, Cox executive analyst, said delays in purchases began as a response to COVID-19, but more recently are affected by the recent civil unrest and overall uncertainty about unemployment and a potential second wave of the coronavirus.

Digital retailing has jumped as a result of the pandemic and 58 percent of customers felt buying online was a better experience, Krebs said.

“That is no surprise to us,” she said.

One enormous jump was in the category of year-over-year numbers for deals submitted online. May 2020 saw a 662 percent increase of deals submitted online compared to May 2019 of those types of deals.

Introduced last year by Manheim, Lot Vision is a GPS-based wireless device that is placed in a vehicle’s on-board diagnostic port and reports its whereabouts on a Manheim lot within ten feet. Recently, the technology was enhanced to include vehicle tracking by VIN and work order number.

“Our lots are full right now, and dealers who are previewing vehicles tell us that Lot Vision is helping them find vehicles in minutes versus hours,” said Patrick Brennan, SVP, marketplace. “Our goal is to extend this technology to all locations and continue to make improvements to enhance our client’s experience.”

Dealers and transporters simply input a work order number or VIN and activate “Location Services” on a smart phone or tablet to pinpoint the vehicle’s exact location and path to find it. For vehicles without an on-board diagnostic port, trackers are attached to the steering wheel. In addition to making it easier to find vehicles, Lot Vision also speeds up vehicle processing for transporters.   

Lot Vision is now in place at Manheim Atlanta, Manheim Georgia, Manheim Dallas, Manheim Dallas-Fort Worth, Manheim San Antonio, Manheim Orlando, Manheim Palm Beach, Manheim Tampa, Manheim Central Florida, Manheim St. Pete, Manheim Lakeland, Manheim Ft. Lauderdale, Manheim Ohio and Manheim Chicago, the latest location to be deployed this month.

Dealer clients are now implementing this solution at dealerships, as Lot Vision’s valued technology extends beyond Manheim lots. It is empowering dealers with the ability to track inventory on multiple lots and get vehicle status insights remotely when lot access is limited.  Other clients interested in this solution can work directly with Cox2M.

New-vehicle retail sales in June are expected to be down from a year ago, according to a joint forecast developed jointly by J.D. Power and LMC Automotive. Retail sales are projected to reach 1,002,600 units, a 5.7 percent decrease compared with the J.D. Power pre-virus forecast and 11.3 percent decrease compared with June 2019. Reporting the same numbers without controlling for the number of selling days translates to a decrease of 14.7 percent over last year. (Note: June 2020 contains one less weekend and one less selling day than June 2019).

“The industry continues to show signs of recovery in June, with retail sales down only 6 percent compared with the J.D. Power pre-virus forecast,” said Thomas King, president of the data and analytics division at J.D. Power. “This represents a significant improvement from May when retail sales were off 20 percent from the pre-virus forecast. The combination of pent-up demand, states relaxing coronavirus-related restriction and elevated incentives are all providing a tailwind for the industry.”

Total sales in June are projected to reach 1,085,600 units, a 25.1 percent decrease compared with June 2019. Reporting the same numbers without controlling for the number of selling days translates to a decrease of 28.0 percent over last year. The seasonally adjusted annualized rate (SAAR) for total sales is expected to be 12.8 million units, down 4.4 million units from a year ago.

Remarkably, in markets like Detroit (one of the most severely affected areas by COVID-19), retail sales are on pace to exceed 2019 levels.

Record levels of manufacturer incentives for the month of June are supporting the sales recovery. Incentive spending is on pace to reach $4,411 in June, the highest ever for the month and an increase of $445 from June 2019. Incentives on cars are expected to be up $459 to $4,031, with trucks/SUVs up $407 to $4,524.

Transaction prices continue to set records and are on pace to rise by 3.9 percent to $34,981, the highest level ever for the month of June. Record prices are being supported by the ongoing shift in consumer demand from cars to trucks/SUVs. Car sales are on pace to account for just 24 percent of new-vehicle retail sales in June, the lowest level ever for the month of June and the third month in a row below 25 percent. As the industry shifts towards more expensive products, SUV mix is expected to reach a record 56 percent.

The International Automotive Remarketers Alliance will hold its 2020 Virtual Summer Roundtable on Aug. 20, replacing the original event that had been scheduled in San Antonio.

The one-day online conference will also be available on a mobile app. It is the 19th annual summer roundtable.

A virtual expo hall will be part of the experience ad opportunities for interactions between attendees, various topics and bonus features and materials available for registrants even after the conference is over, according to the IARA.

Keynote speakers will include Melinda Zabritski, senior director for Experian Automotive’s financial solutions team. She has overseen the product strategy for Experian Automotive’s lending channel and creation of the automotive credit vertical.

Another keynoter will be Blake Statton, business consultant for Michael Hyatt & Co., who teaches business owners how to apply productivity tools on a corporate level. He has also served as a small business marketing consultant.

Individual sessions include a panel of remarketers discussing “Where Do We Go from Here?” moderated by Scott Kolb, an IARA founding member.

Other sessions include: a dealer panel moderated by Steve Jordan, CEO of the National Independent Automobile Dealers Association; webinars on titling, logistics and repossessions; and a panel on the new business dynamic of physical auctions.

Information on the conference and registration is available at www.iara.biz.

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