Lane watch: Unprecedented challenges used-car managers now face


Based on the dynamics described in the most recent updates compiled by Black Book, used-car managers might have one of the most difficult industry jobs nowadays.

They’re seeing increased supply and decreased demand collide in the auction lanes, creating significant uncertainty about how to gauge trade-in values.

“Sellers that focus on cheaper units are hopeful that the arrival of stimulus checks that were deposited in many American’s bank accounts last week will generate additional sales,” Black Book said in its newest weekly COVID-19 market update.

“We have heard repeatedly from dealers recently about their hesitancy to put a value on a trade-in that is not part of their core inventory,” Black Book analysts continued. “There is a concern that if a dealer numbers a vehicle that they have not traditionally stocked, they might get ‘stuck’ with it and lose money in a depreciating market, therefore, making it not risk-worthy.

“In some cases, small dealers are missing out on new sales if they can’t find a fellow dealer or wholesaler that will agree to purchase the trade-in from them immediately,” analysts went on to say.

As auctions slowly ramp up sales activities, the prices fetched for vehicles continues to soften, according to the latest Black Book Market Insights report.

Based on volume-weighted data, Black Book indicated overall car segment values decreased by 1.40% this past week, marking the fourth consecutive week of large depreciations and pushing the four-week average drop to 1.02%.

In fact, Black Book said this past week produced the largest depreciation for the car segment in at least the past two years.

“The premium sporty car segment was the only segment to have smaller declines as the specialty and collector units don’t appear to have their demand falling as sharply,” analysts said.

Meanwhile, Black Book’s volume-weighted truck information showed that overall truck segment values — including pickups, SUVs and vans — decreased by 1.00% last week. Analysts pointed out the drop constituted the largest week-over-week decline for trucks and SUVs since December.

“As we saw in the 2008 recession, the full-size van segment is only slowly depreciating each month as the low supply alleviates some of the pressure that the other segments are experiencing,” analysts said.

Overall, Black Book reported that online bidder attendance has been relatively strong at digital sales, but the number of active bidders is low. Analysts emphasized the demand to purchase right now is low, but many buyers are still watching each week in hopes of finding a “steal.”

Black Book vice president of automotive valuations Laura Wehunt said, “Sales rates have shown a small improvement as some auctions have re-started their digital sales, but to the detriment of retention. This past week, we saw values really begin to fall as the increasing supply and limited demand pushed values down.”

Black Book’s representatives watching those online sales and online activities reinforced Wehunt’s assessment. Here is the latest rundown from five different locations:

— From Florida: “The cars and trucks under $11,000 sold well today.”

— From Illinois: “Right from the start this seemed like it was going to be a good sale. Bidding was active, vehicles were selling, and buyers were stepping up when bids did not reach the floor.”

— From New Jersey: “There were 40-plus buyers online, but only four were active so most were there just to get a feel for the market.”

— From South Carolina: “This week, we had a conversion rate of roughly 40%, compared to 28% last week. The $8,500 and under vehicles were the ones selling.”

— From North Carolina: “I’m currently only selling about 25% of my typical volume for this time of year.”

One other note from the latest Black Book updates. And it’s connected with all those challenges faced by used-car managers mentioned previously.

“Storage space is the newest challenge facing auctions,” Black Book said. “There are auction locations where inventory is starting to stack up as no-sales are still dominating the lanes and leases expirations are being turned in.

“Many auction houses are looking for additional land to accommodate the overflow of standing vehicles,” Black Book added.

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