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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