The economic signals are mixed this month and certainly open to a number of interpretations, but it appears the average consumer is leaning toward the negative interpretation. News about oil in the Gulf and the size of the deficit appearing daily in the media certainly contribute to the “down mood.” The peak of stimulus spending and incentives is over and without consumer spending to speed it along, the recovery will be a long slow process.
We may have hit the soft spot that some economists feel normally occurs 12 months into a recovery. The shift away from stimulus spending (cash for clunkers, tax incentives for home buyers, etc.) isn’t being replaced by consumers in the marketplace. This adds weight to the argument that the recovery will be lead by manufacturing, not consumer spending.
The Conference Board1 says consumer confidence is down substantially after three consecutive months of increases — 52.9 in June compared to 62.7 in May — an indication that consumers are hunkering down with concerns about housing, income, and jobs. However, the Thomson Reuters / University of Michigan2 poll shows consumer sentiment increased from 73.6 in May to 76 in June. As I said, the signals are mixed.
Ultimately, it’s consumers who drive the new and used vehicle market. June auto sales were down month to month, but they were up 14.4% from June 2009. The May to June volume drop in new vehicle sales is a seasonal norm. All the brands except Mitsubishi and Suzuki posted higher sales than last year in June. Year to date, Suzuki is the only brand selling less than last year. Despite the improvement over last year, a number of analysts have lowered their new vehicle sales expectations for the year. 2010 will certainly see more sales than the 10.4 million units in 2009, but probably not more than 11.5 million units.
On the used vehicle side, prices continued their general decline; not unusual at this time of year. Tax returns have been spent; the vehicles that “died” over the winter have been replaced; new car clearance sales have started in anticipation of the 2011 models; all these things contribute to the seasonal downward price pressure on used vehicles.
The pressure is amplified this year because used prices are high enough that a new vehicle could be an alternative purchase to a late model used vehicle. Some new vehicles carry a lower monthly payment than the used vehicle being considered by the consumer.
Late model used vehicles are particularly vulnerable to new vehicle alternatives. Warranties, incentive dollars and financing options available on new vehicles can make a lesser equipped new model more attractive than a well equipped used vehicle.
Volume at auction continued its seasonal decline. The lack of supply helps to keep the prices from falling too far. Bidders at the auctions continued to show restraint, but Donlen’s sales percentage remained high along with our retention dollars in relation to NAI. The market is being careful, but remaining active.
Sales Results:
Donlen Vehicle Remarketing averaged 101.68% of NAI on clean vehicles sold at US auctions. The typical unit was a 2007 model with 79,900 miles and $835 in estimated damages. That unit sold for $10,392 in June. These results are virtually unchanged from May.
Across all our sales in June, the average unit was a 2006, but it was actually a few months newer than last month’s average unit. It had 94,775 miles and $1,297 in estimated damage. The average sale price was $9,229; down about 3.6% from last month. While the average unit was a 2006, the most frequently sold model year was a 2008.
The most frequently sold model was the Chevy Express Van followed by the F-150 and the Silverado. Those three models accounted for over 18% of our sales.
In June, sedans accounted for 51% of our sales and had the highest return on NAI; 102.88%.
SUV’s made up 23% of our sales and returned 102.88% of NAI. These units averaged the lowest miles and least damage of the segments.
Pick-ups and utilities accounted for remaining 26% of sales. These units brought 98.92% of NAI and had the highest miles and most damage.
1 http://www.conference-board.org/data/consumerconfidence.cfm
