Automotive Fleet

JAN 2014

Magazine for the car and truck fleet and leasing industry

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MARKET TRENDS BY MIKE ANTICH The Return of a 'Normal' Used-Vehicle Market Demands a Seasonal Remarketing Strategy F or the past three years, everyone has been a remarketing genius. Te low inventory of used vehicles in the wholesale market helped infate resale values by about 10 percent. However, as greater volumes of used vehicles begin to enter the wholesale market, vehicle supply will start to meet buyer demand, which will put downward pressure on resale values. In many ways, the new used-vehicle market will demand returning to the basics, namely recognizing the seasonality of the used-vehicle market and knowing the best (and worst) time of year to remarket vehicles. "During 2010-2012, remarketing success was a result of simply ofering your product due to the very limited supply of used vehicles in the wholesale channels. As the volumes increased, it has become more important than ever to be strategic in one's remarketing eforts. Not only using the appropriate channel and venue, but retention and depreciation levels are related to seasonality. You can't just hold cars out of the market and out of service and wait for the stronger markets, but must work to take vehicles out of service during the more active and aggressive market times," said Ricky Beggs, senior vice president, editorial director for Black Book. So, what are the best months for vehicle remarketing? Traditionally, the best time to sell used vehicles is in the fall (September to November) and the spring (February to May). During these months, resale values may increase as much as 15 percent, as opposed to selling the identical vehicles in winter or summer. Te worst time to remarket vehicles is from late November until mid-February. Why? Many dealers are reluctant to put automobiles in their inventory prior to the frst of the year because they have to pay property tax on them. Also, as cold weather and the holiday season approach, there is a decrease in the number of buyers in the market. With more inventory than buyers, prices sofen. As a result, dealers try not to carry a lot of inventory during the winter. Te exception is 4x4 sport/ utility vehicles, which usually sell well during winter months. Afer February, used-vehicle acquisitions by dealers usually begin to increase. Afer the winter season ends, dealers sell out the remainder of their inventory and are once again hungry for used vehicles. Tat's why the spring used-vehicle market is so strong. Sometimes this is easier said than done, due to the staggered new-model introductions by OEMs and long order-to-delivery delays due to quality holds. "Ofen driven by the availability of replacement units, this is another area of change within the feet industry as release dates have moved away from the traditional August to September time period," Beggs said. Despite this, one of your top job priorities as a feet manager is to obtain the highest resale price for each company vehicle taken out of service. Te best (and easiest) way to do this is by timing your vehicle replacement to coincide with seasonal highs in the used-vehicle market. Also, keep in mind that certain categories of used vehicles have their own seasonal selling cycles. For instance, demand for used minivans is strong just prior to summer because this is the traditional vacation period and families are eager to buy this used vehicle type. On the other hand, full-size sedans traditionally are in high demand in March and April. Knowing this, you can control vehicle depreciation costs by simply timing vehicle replacements to take advantage of seasonal market highs and avoid seasonal lows. Avoid selling vehicles in mid-December through January, because there is very little demand for used vehicles at that time of year. Not only do vehicles take longer to sell, but they also sell for less. With a minimum amount of efort, you can lower your depreciation costs by simply remembering that fall and spring are traditionally the best times to sell your used vehicles. Let me know what you think. AF SEASONAL DIFFERENCES IN USED-VEHICLE PRICES 2011 Ford Fusion SE 4D Sedan Dates Sept. 2012 Oct. 2012 Nov. 2012 Dec. 2012 Jan. 2013 Feb. 2013 March 2013 Apr. 2013 Price Difference Fall vs. Winter Sept. vs. Feb. Fall vs. Spring Sept. vs. April Wholesale Average $14,300 $14,050 $12,950 $12,600 $12,600 $13,050 $13,250 $13,550 2010 Ford Fusion SE 4D Sedan $ Difference % Difference ($250) ($250) ($1,100) ($350) $0 $450 $200 $300 (1.72%) (1.75%) (7.83%) (2.70%) 0% 3.57% 1.53% 2.26% Wholesale Average $12,750 $12,500 $11,550 $11,300 $11,300 $11,600 $11,900 $12,200 –$1,250 % Difference ($200) ($250) ($950) ($250) $0 $300 $300 $300 (1.54%) (1.96%) (7.60%) (2.16%) 0% 2.65% 2.59% 2.52% –$1,150 –$750 $ Difference –$550 SOURCE: BLACK BOOK 10 AUTOMOTIVE FLEET I JANUARY 2014

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