Happy New Year: Ricky Beggs on Trends to Watch in 2014

by Jon LeSage, edi­tor, Used Car Mar­ket Reports

It’s a new year and Used Car Mar­ket Reports is pleased to come back as a week­ly newslet­ter. Dur­ing the past year, remar­keters con­tin­ued to expe­ri­ence changes in tech­nol­o­gy (such as more mobile apps) while also redis­cov­er­ing that fun­da­men­tals are still in place and have to be tak­en quite seri­ous­ly (phys­i­cal auc­tions being a clear exam­ple). Ricky Beg­gs, Edi­to­r­i­al Direc­tor at Black Book, spoke to me last week about mar­ket trends that the Black Book team expects to see this year (includ­ing how well the clas­sic car mar­ket is doing)……

  • Pric­ing: Black Book expects this year to end with a depre­ci­a­tion lev­el of 13.5%. While that’s more than the 12.8% depre­ci­a­tion seen in 2013 and 12.4% in 2012, it’s much more sta­ble than the 15% to 18% depre­ci­a­tion lev­els expe­ri­enced in the pre-reces­sion mar­ket.
  • New Vehi­cles Sales: Black Book sees this hit­ting the 16 mil­lion mark dur­ing 2014; while a high of 16.5 mil­lion was hit pre-reces­sion, used vehi­cle vol­ume isn’t expect­ed to become flood­ed and plunge down­ward because of it. New vehi­cle sales have been help­ing US eco­nom­ic recov­ery, and there’s a good sup­ply com­ing back to the used vehi­cle mar­ket.
  • Deal­ers: Deal­ers are great entre­pre­neurs on the remar­ket­ing front, find­ing the right inven­to­ry. They don’t need to be as aggres­sive in sell­ing used vehi­cles.
  • Incen­tives: Man­u­fac­tur­ers are doing a pret­ty good job of keep­ing incen­tives in-line with the mar­ket.
  • New vs. Used: We saw lack of sup­ply and tight financ­ing in 2009 and 2010, which led to used and new being very sim­i­lar in month­ly pay­ments. The mar­ket has been return­ing to where it was in the new vs. used pric­ing lev­els; ample fund­ing has helped that hap­pen.
  • Seg­ments: Full size pick­ups are still doing very well in strong reten­tion. An improv­ing econ­o­my has helped includ­ing the con­struc­tion busi­ness. There’s more demand in the mar­ket­place than build from OEMs. Redesign­ing pick­ups is help­ing – Dodge in 2013, GM this year, the new Toy­ota Tun­dra, and the Ford F-Series in 2015. Gaso­line prices aren’t high enough to bring back entry lev­el cars, hybrids, or elec­tric vehi­cles. We’re see­ing an increase in gas prices since mid-Decem­ber and that should con­tin­ue through mid-Feb­ru­ary; but that’s hap­pened over the past cou­ple of years. Beg­gs expects to see a high in the nation­al aver­age some­where in the $3.75 to $3.85 range; it aver­aged $3.49 last year.
  • Off-lease Returns: Black Book doesn’t expect that a high­er vol­ume of off-lease returns in 2014 will soft­en the mar­ket very much. They expect that 60% of new car sales this year will have trade-ins. That’s a larg­er sup­ply of trade-ins, but the off-lease num­bers are expect­ed and are built into their depre­ci­a­tion fore­cast.
  • Lease Incen­tives: There are a lot of good deals out there for con­sumers on leas­es with incen­tives play­ing into it. It’s still a bit of a ques­tion for Black Book on how the actu­al resale val­ues will per­form against their pro­ject­ed resid­u­als. They’ll be look­ing at it. It depends on how they remar­ket them. Toy­ota, for exam­ple, has been offer­ing a great leas­ing deal on the Cam­ry, but has been doing a lot of the remar­ket­ing online and has also ben­e­fit­ed from its strong brand strength and aware­ness.
  • Phys­i­cal Auc­tions: They’re not see­ing much growth in vol­ume, but they’re def­i­nite­ly not going away. A lot of deal­ers need to go to auc­tions and expe­ri­ence it, and feel what the atmos­phere is like out there. For the Black Book team, going out to auc­tions is an inte­gral part of their report­ing.
  • Clas­sic Car Mar­ket: If you watch last week’s video report from Beg­gs (see that video in this week’s Used Car Mar­ket Reports), you’ll hear Jack Neshe, Pres­i­dent of the Nation­al Auto Auc­tion Asso­ci­a­tion, talk about how much he loves vis­it­ing clas­sic car sales. Beg­gs has seen clas­sic cars become “unbe­liev­ably strong” in the past year. It’s a lot more than just the famous auc­tions like Bar­rett-Jack­son in Scotts­dale, Ariz., or Peb­ble Beach Con­cours d’Elegance in Mon­terey, Calif. More recent­ly, Greens­boro Clas­sic Car Auc­tion, Chat­tanooga Auto Auc­tion, and oth­er auc­tions are see­ing a lot of local mar­ket activ­i­ty. They’re not just car cor­rals, but have become expe­ri­ences that a lot of peo­ple look for­ward to hav­ing. It’s a great invest­ment, he said.

 

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