Trends in the Used Vehicle Market –
Causes & Consequences
ACVL Webinar
2/10/11
Manheim Used Vehicle Value Index
January 1995 = 100
125
120
115
110
105
100
95
Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan- Jan95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
Source: Manheim Consulting
2
Manheim Used Vehicle Value Index
Concept:
A single measure of used vehicle price change that is
independent of underlying shifts in the characteristics of
vehicles being sold
Steps:
3

All Manheim U.S. sales (5+ million annually)

Classify by market segment

Account for shifts in mileage

Weight to provide unchanging mix

Seasonally adjust
Manheim Index
Sample Distribution by Market Class
Compact car
Fullsize car
Midsize car
Pickup
Luxury car
SUV / CUV
Sporty car
Van
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Source: Manheim Consulting
4
Luxury Vehicles as % of
Total Auction Sales
25%
20%
15%
10%
5%
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Source: Manheim Consulting
5
Percent Distribution of Auction Sales
By Model Year
2003
2004
2005
2006
2007
2008
2009
2010
30%
25%
20%
15%
10%
5%
0%
Current
or newer
1 MY
prior
2 MY
prior
3 MY
prior
4 MY
prior
5 MY
prior
6 MY
prior
7 or
more MY
prior
Source: Manheim Consulting
6
Average Mileage Compact Cars Sold at Auction
67,000
62,000
57,000
52,000
47,000
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Source: Manheim Consulting
7
Average Auction Price –
Fullsize SUVs
Unadjusted
Mileage & Seasonally Adjusted
$19,000
$18,000
$17,000
$16,000
$15,000
$14,000
$13,000
$12,000
$11,000
$10,000
$9,000
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Source: Manheim Consulting
8
Price Changes for Selective Market Classes
Annual Average % Change, 2009 - 2010
14%
12.5%
12%
9.5%
10%
8%
7.4%
8.8%
7.4%
6.3%
5.2%
6%
4%
2%
0%
Total
Compact
cars
Midsize
cars
Luxury
cars
Pickups SUV / CUV
Vans
Source: Manheim Consulting
9
Manheim Used Vehicle Value Index –
Annual Average Percent Change
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
-8%
Source: Manheim Consulting
10
New Vehicle CPI
1982-1984 = 100
150
140
130
120
110
100
90
80
70
60
50
Jan-70
Jan-80
Jan-90
Jan-00
Jan-10
Source: Bureau of Labor Statistics
11
Year-over-Year Percent Change in
New Vehicle CPI
14%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
Jan-75
Jan-80
Jan-85
Jan-90
Jan-95
Jan-00
Jan-05
Jan-10
Source: Bureau of Labor Statistics
12
Dollar Change Over 3 ½ Years in
New Vehicle CPI and Manheim Index
New Vehicle CPI
Manheim Index
$2,000
$1,500
$1,000
$500
$0
-$500
-$1,000
-$1,500
Jan-98
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Jan-10
Source: Bureau of Labor Statistics & Manheim Consulting
13
Manheim Index versus Mix & Quality Adjusted
New Vehicle Price 3 ½ Years Prior
55%
50%
45%
40%
35%
96
Ja
n97
Ja
n98
Ja
n99
Ja
n00
Ja
n01
Ja
n02
Ja
n03
Ja
n04
Ja
n05
Ja
n06
Ja
n07
Ja
n08
Ja
n09
Ja
n10
Ja
n11
Ja
n-
Ja
n-
95
30%
Source: Bureau of Labor Statistics & Manheim Consulting
14
Rental: Stability Ahead
15

New vehicle sales into rental stabilizing at “new normal”.

Shift from program cars to risk units is completed.

Increased service life for risk units has leveled off.

Off-rental prices will show stability at current high base.
New Vehicle Sales Into Rental &
Rental Fleet Size
Millions
New Purchases
Average Fleet Size
2.2
2.0
1.8
1.6
1.4
1.2
1.0
0.8
1998
2000
2002
2004
2006
2008
2010
Source: Bobit Business Media
16
Distribution of New Vehicle Sales into
Rental - Program versus Risk
Program
Risk
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Source: Bobit Business Media & Manheim Consulting
17
Average Mileage –
Rental Risk Units
2007
2008
2009
2010
45,000
40,000
35,000
30,000
25,000
20,000
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source: Manheim Consulting
18
Average Auction Price –
Rental Risk Units
2007
2008
2009
2010
$13,500
$13,000
$12,500
$12,000
$11,500
$11,000
$10,500
$10,000
$9,500
$9,000
$8,500
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source: Manheim Consulting
19
Leasing:
Growth in Originations & Satisfaction
Lease Originations - Millions of Units
4.0
3.5
3.7
3.4
3.5
3.0
2.7
2.5
2.5
2.5
2.7 2.7
2.1 2.1
2.0
2.0
1.5
1.7
1.1
1.0
0.5
0.0
1998
2000
2002
2004
2006
2008
2010
Source: Manheim Consulting
20
Lease Penetration Rates
by Manufacturer
2008
2009
2010
Chrysler
17.0%
2.9%
9.2%
Ford
15.1%
5.5%
9.8%
GM
11.1%
2.1%
8.8%
Honda
19.4%
18.7%
28.7%
Toyota
15.8%
15.6%
24.5%
2.4%
2.2%
12.3%
BMW
51.0%
51.3%
48.6%
Mercedes-Benz
49.2%
46.6%
51.7%
Total Industry
17.9%
13.1%
19.1%
Hyundai
Source: J.D. Power and Associates
21
GMAC Sales Proceeds as % of ALG –
U.S. Lease Terminations
Source: Ally
22
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
0
20 9
10
20 E
11
20 E
12
20 E
13
20 E
14
20 E
15
E
millions of units
Off-Lease Volumes –
Another Down Cycle Ahead
4.0
3.5
23
3.0
2.5
2.0
1.5
1.0
Source: Manheim Consulting
Repossessions:
Lower Volumes & Older Units
Number of Repossessions - Millions of Units
2.2
2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Manheim Consulting
24
Dealer Consignment:
Steady Growth Ahead
Millions
Dealer Consigned Vehicles Sold at NAAA Member Auctions
6
5
4
3
2
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
05
20
04
20
03
20
02
20
01
20
00
19
99
1
Source: 1999-2009 NAAA Surveys, 20010-2015 Manheim Consulting estimate
25
New Car & Light-Duty Truck Sales
Seasonally Adjusted Annual Rate - 3-Month Moving Average
19
millions of units
18
17
16
15
14
13
12
11
10
Jan-11
Jan-09
Jan-07
Jan-05
Jan-03
Jan-01
Jan-99
Jan-97
Jan-95
Jan-93
Jan-91
Jan-89
Jan-87
9
Source: Automotive News
26
New Vehicle Sales:
Used
Vehicleperspective
Production
A long-term
New Car & Light-Duty Truck Sales
20
millions of units
18
16
14
12
10
8
6
4
1960
1970
1980
1990
2000
2010
Source: Automotive News
27
Vehicles in Operation from 2 & 3 Model
Years Past (in millions of units)
40
35
30
25
20
15
10
5
28
19
92
19
95
19
98
20
01
20
04
20
07
20
10
20
13
20
16
19
89
19
86
19
83
19
80
19
77
19
74
19
71
19
68
0
Used Vehicle Retail Sales
Millions
Total
Dealers
50
45
40
35
30
25
20
15
10
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Source: CNW Marketing Research
29
Ratio of Used Vehicles Retailed
to New Vehicles Retailed
4.0
3.5
3.0
2.5
2.0
1.5
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
1.0
Source: Automotive News & CNW Marketing Research
30
Certified Pre-Owned Sales
In Millions
2.0
1.5
1.0
0.5
0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Automotive News
31
% Change Used Units Retailed –
Same Store Basis (Publicly-traded Dealership Groups)
Weighted average for KMX *, AN, PAG, SAH, GPI, ABG, and LAD
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
2004
2005
2006
2007
2008
*KMX shifted forward one month to correspond with calendar quarter
32
2009
2010
Source: Company filings
Monthly Change In Nonfarm Payrolls
3-month moving average – in thousands
Total
Private Sector
400
200
0
-200
-400
-600
-800
n-0
a
J
8
y-0
a
M
8
p-0
e
S
8
n-0
a
J
9
y-0
a
M
9
p-0
e
S
9
n-1
a
J
0
y-1
a
M
0
p-1
e
S
0
n-1
a
J
1
Source: Bureau of Labor Statistics
33
34
Retail Sales Recover from Summer Slowdown
Retail Sales, excluding motor vehicles - Monthly Percent Change - Seasonally Adjusted
1.5%
1.0%
0.5%
0.0%
-0.5%
-1.0%
-1.5%
Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec10
10
10
10
10
10
10
10
10
10
10
10
Source: U.S. Department of Commerce
35
Savings Rate Rises
Personal Savings as % of Disposable Personal Income
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
n-9
a
J
5
n-9
a
J
7
n-9
a
J
9
n-0
a
J
1
n-0
a
J
3
n-0
a
J
5
n-0
a
J
7
n-0
a
J
9
n-1
a
J
1
Source: Bureau of Economic Analysis
36
Personal Income & Wages and Salaries
Year-over-year percent change based on 3-month moving average
Personal income
Wages & salaries
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
Jan01
Jan02
Jan03
Jan04
Jan05
Jan06
Jan07
Jan08
Jan09
Jan10
Jan11
Source: Bureau of Economic Analysis
37
Household net worth rises
in third quarter of 2010
Percent Change from Previous Quarter
0%
0%
0%
0%
0%
1
20
10
Q
1
20
08
Q
1
20
06
Q
1
20
04
Q
1
20
02
Q
1
20
00
Q
19
98
Q
1
0%
Source: Federal Reserve Board
38
Household net worth recovers, but
remains $11 trillion below its peak.
Household Net Worth – In Trillions
$70
$60
$50
$40
$30
$20
$10
39
20
10
20
05
20
00
19
95
19
90
19
85
19
80
19
75
19
70
$0
Outlook and Implications

New vehicle sales
– A lower underlying trend
– Movements around that trend driven by labor market and credit conditions
– Manufacturers maintain inventory and pricing discipline

Retail sales and profits continue to shift in favor of used vehicles

Less supply and stable demand means strong used vehicle pricing

Economic recovery may surprise to the upside in the near-term,
but we will fail to achieve previous peaks in employment,
household net worth, and new vehicle sales prior to the next
recession.
40