Automotive Fleet

DEC 2013

Magazine for the car and truck fleet and leasing industry

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DEPRECIATION SOURCE: AF RESEARCH DEPT. Average Monthly Miles Average Months in Service Average Cap Cost Monthly Depreciation Cost in CPM Depreciation Dollars per Month 2,047.99 32 $18,080.16 $0.15 $313.41 As fuel prices started to decline in 2013, so, too did resale values for compact models. but older vehicles. "Although rising wholesale inventory levels were projected to result in a decrease in year-over-year resale values in CY-2013, increased new-vehicle transFORTIN action prices and lower newvehicle inventory levels mitigated the projected decline in pricing," said Paul Fortin, economist and VP, strategic modeling and analytics research team for LeasePlan USA. Another perspective is ofered by Donlen. "Prices behaved 'normally' in 2013, in that sale prices declined month to month on similar vehicles," said Gus Xamplas, VP of remarketXAMPLAS ing for Donlen. As new-vehicle sales continue to increase, the used-vehicle market is beginning to see better supplies from trade-ins, along with more trade-ins actually making their way into the wholesale channels, instead of remaining with franchised dealers and sold to their customers. "Te wholesale market was still strong by historical standards, but showed a steady erosion of prices throughout the year. Inventory increased slightly as the year progressed, which tends to drive down pricing. Te feet market, though, seemed to show slight decreases in inventory, which may be attributable to several factors. Fleets are tending to hold onto vehicles slightly longer as months-inservice and mileage showed increases during the year. Increases in truck and SUV orders versus traditional automobiles tend to move the in-service times and mileages upward," said RENNELS 26 AUTOMOTIVE FLEET I DECEMBER 2013 Average Monthly Miles 2,108.78 Average Months in Service Average Cap Cost 30 $19,827.31 Monthly Depreciation Cost in CPM Depreciation Dollars per Month $0.18 $371.79 Higher retail transaction prices for used intermediate-sized cars, along with tight inventory, has helped boost wholesale values. Jack Rennels, VP, remarketing ng for Emkay. Depreciation Trends Broken Out by Vehicle Class Depreciation trends for all classes of vehicles were relatively stable during CY-2013. Below is w a summary of depreciation trends broken out by vehicle class: ● Intermediate-Size Cars: "Depreciation costs for intermediate vehicles in CY-2013 were lower compared to CY-2012 as the usedvehicle market still enjoyed a lower supply of intermediate cars through most of the year. Tere was only a slight adjustment to prices in the second quarter of 2013 as supply increased due to an increase in rental units and trade-ins," said Aiken of Wheels Inc. Higher retail transaction prices for used intermediate-sized cars helped boost wholesale values. "Depreciation costs for intermediate sedans declined nominally in CY-2013 when compared to CY-2012. Although the increase in of-lease penetration increased wholesale vehicle levels for the segment in CY-2013, sale prices were not afected due to upward pressure from higher retail transaction prices driven by a decrease in manufacturer incentives," said Fortin of LeasePlan USA. In addition to the lower supply of intermediate-sized cars in the wholesale market, these feet vehicles, on average, were being kept in service for shorter than traditional norms, resulting in a slight uptick in resale value. "Depreciation for intermediate-sized vehicles decreased from an average of 1.7 percent to 1.52 percent in 2013, compared to 2012 numbers. While we saw an increase in the average capitalized costs (3 percent) and a rise in monthly miles (4.3 percent) from 2,0 2,069 to 2,162, the months in serv vice decreased slightly from 35 months in service (MIS) to 34 MIS (-3 percent)," said Graham of ARI. GE Capital Fleet Services reported similar data. "Depreciat tion trends for intermediate-size cars in CY-2013 are down approximately 2 percent compared to CY-2012," said Jastrow of GE Capital Fleet Services. But, on average, resale values were lower when compared to CY-2012. ● Compact Cars: "Tis segment of cars actually held frm in CY-2013 compared to CY-2012, as consumers became accustomed to fuel prices more than $3 a gallon, but there were other causes, such as an increase in supply in other vehicle segments and improved fuel ratings," said Aiken of Wheels. However, as fuel prices started to decline in 2013, so, too, did resale values for compact models. "Depreciation costs increased signifcantly year-over-year for compact cars due to a decline in market demand for the segment as a result of falling fuel prices in CY-2013," said Becky Langmandel, director, strategic modeling and analytics research team for LeasePlan USA. On average, compact cars performed comparably to intermediate-sized vehicles in the wholesale market. "Vehicle depreciation for compact-size vehicles remained relatively fat, decreasing slightly from an average of 1.43 percent to 1.41 percent in 2013, as compared to 2012 numbers. While we saw an increase in average capitalized costs (2.5 percent) and a rise in monthly miles (19.7 percent) from 1,616 to 2,014, the months in service decreased signifcantly from 52 MIS to 36.2 MIS or -43.5 percent," said Graham of ARI. According to Jastrow of GE Capital Fleet SOURCE: AF RESEARCH DEPT. 2013-CY DEPRECIATION EXPENSES: INTERMEDIATE CARS 2013-CY DEPRECIATION EXPENSES: COMPACT CARS

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