Spinella: Watch Out for Overspending on Incentives and Residuals, Manheim: Dealer Used Sales Down but Profits Up January 14, 2015
Spinella_Art_ head shot

Special Report: Is There Room for Auto Industry to Grow or is it Overextended?

Art Spinella
CNW Research

Are US auto sales heading for overextension and a crash? Probably not, according to CNW Research. Calendar year 2000 saw 17.4M units sold, the largest ever, with 6.2% of the population making a new vehicle acquisition. The record for highest population making purchases was 7.5% in 1986. Calendar year 2014 saw 16.5M sold to 5.35% of the population. That’s not likely to shoot up next year – probably more like 5.39% buying new vehicles with 2015 finishing at 17.12M sold.

Here’s the Special Forecast Issue for 2015

Incentive Spending Should Continue to Increase to Hit that 17.2M Sales Mark:
Auto industry did lose more than $10B in early 2000s due to inflated residual values.

CNW Forecasts Transaction Prices Will Sink to 81% of MSRP from Current 84%:
That should come from higher incentives and bigger dealer trade-in values.

Consumers Paid About $2,800 More for CPO than Comparable Non-CPO Used Cars Last Year:
Projecting that will increase in 2015 with average premium in the $3,100 range.

Manheim Reports Four Consecutive Years in Pricing Stability

Tom Webb
Chief Economist
Manheim Consulting

The December 2014 Manheim Used Vehicle Value Index reached 123.9, an increase of 1.8% from a year ago. That was the third consecutive month for wholesale used vehicle prices to see an increase. Stability continued in 2014 – fourth consecutive year showing least volatility in wholesale pricing since the Manheim Index started in 1995. The economy has improved, and so have remarketing practices enabling commercial consignors to anticipate and respond to the market, which has helped minimize impending swings in wholesale prices.

Manheim report on December 2014 market

Total Used Unit Sales by Dealers Were Off 4.1% in December and 1.4% for 2014:
Most will report record profits for year mainly because of increased operating efficiencies.

Widely Expected that CPO Sales Will Reach 5th Record Sales Year in 2015:
Higher off-lease volumes increase both ability and need to increase these programs.

Vehicles in $13K to $15K Price Range Continued Showing Greatest Price Strength:
Midsize cars were the pleasant surprise in residual retention in December.
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