It has been an interesting week of auction activity and trending patterns within the market. The final analysis of the week had us adjusting 2097 vehicles per day.  From these adjustments we had the smallest percentage of vehicles increasing since the week ending February 24, 2012, a full 12 weeks ago. Of those increases, the average increase of $94 was the second smallest dollar increase since the week ending February 17, 13 weeks ago.

Gas prices continued to decline, this past week by another $.04 which makes for a total $.15 over the past 5 weeks. As we looked at the overall changes by segment type, this is the first time since the price per gallon slide began that the trend for trucks and cars week over week reacted as one might normally expect.

After looking at the comments from the dealers included in the survey personnel reports, overall they fall into place as expected. There were even more comments relating to an increase in the number of “no sales” and the market being “slightly off”. An interesting comment from a North Carolina auction indicated the “dealers’ lanes showed better results”. After talking with several remarketers during the week, many of them are having higher no sales percentages by design. Their backlog of inventory to remarket remains at such low supplies that they don’t see the urge to downwardly adjust their existing floors.

The trucks you could say turned the corner as 7 of the 14 segment types increased for the week. The overall average change of -$1 was the smallest decline in the past 5 weeks. The Full-size Crossovers (FXU) showed the most strength with a $32 increase week over week, now up for 3 weeks running. The Full-size SUVs (FSU) continued a market trend of strength as they have now increased for 10 consecutive weeks. Somewhat surprising was the amount of decline for the Mid-size Crossovers (MXU) at -$40. The largest percentage change for the week was with the Cargo Minivans at an increase of .4%.

Taking a more in-depth look at the car segments, we finished the week at an overall average segment change of -$12 or -.08% (8/100s of 1 percent). The only increasing segment for the week was the Compact Cars (SCC) at $7. This is a run of 11 weeks of positive adjustments. Two segments that had been on multi positive trending weeks of 4 and 12 weeks respectively were the Entry Level Cars (ELC) at -$9 and the Entry Mid-size Cars (EMC) at only -$2 this past week.

Even with the overall declining average amount of the cars and trucks we still see a pretty solid market overall. There are a few more cars coming into the market through the trade-in process, as new car sales continue to increase. This is being offset somewhat as the end of term lease contracts continue to decline and should continue this pattern through the end of December 2012 before starting to increase again after a couple of months into 2013.

Even though the struggling economic news continues to lead the headlines from Europe, we are starting to see positive signs that the long awaited improvement in most economic venues in the U.S. is opening up the pent-up demand for both new and used product.

Speaking of new models, Bret Swanson and I had the chance to get an up close look and detailed information on the just released 2013 Infiniti JX crossover utility. Versatility with greater fuel economy in a product is at the top of many shoppers’ list. The features and luxury being offered by Infiniti on this new model addresses these expectations head on. With a longer wheelbase and overall length than the EX & FX models, and priced in between, gives the consumer another viable option. Even though engine displacement is the same 3.5L, horsepower and torque are lacking somewhat as compared to the 2012 EX & FX. Over the next couple of weeks we will be analyzing this product as it stands within the segment and the competitors, to project an accurate residual forecast that might just make this new utility one of the best lease deals within the upper end crossover vehicle offerings.

We will be back on the auction lanes again this week to see how the market will react. We hope to see you there bidding aggressively for inventory replacement and also to increase your overall offerings. We hope you have a great week.

With gas prices settling down even lower this past week, wouldn’t you expect the car values to be a little weaker and the trucks to get a little stronger? This past week saw gas prices drop on a national average by $.04 with a significant $.11 decline in the price at the pump from April 2 through April 30. For those of you grabbing the green handle and pumping diesel fuel, it was a meager 1.2 cent decline week over week and $.07 decline for the month.

But as the Black Book Editors completed their detailed analysis, which resulted in an average of 1765 vehicles adjusted per day, the average segment change within the cars was a -$8 change for the past week as compared to the -$13 change the prior week. With 4 of the 10 car segments showing an overall increase, the +$12 change within the Entry Level Cars (ELC) was overpowered by the -$36 and -$26 changes with the Premium Sporty Cars (PSC) and the Prestige Luxury Cars (PLC).

With gas getting more affordable the demand and price of trucks and utilities could easily have improved. But nothing in this industry is routine, normal, or completely predictable any more. The average change for the truck segments of -$15 was the largest declining amount for the past 4 weeks. With 5 of the 14 truck segments increasing, the most consistent strength continues to be with the Full-size SUVs (FSU) at +$21, now a positive segment for the past 9 consecutive weeks. The Luxury SUV (LSU) segment declined by $75, which is less of a decline when compared to any of the previous four weeks for that segment.

We are seeing more of the used 2012 models hitting the wholesale market channels. If this fits into your inventory needs, the market driven values of many 2012s can be found in whatever method you have selected to get your values from Black Book. However, remember that the 2011s and 2012s represent the most volatile model years. These late model units will initially show up in the market at a strong value and not too far down the road, as more volume hits the lanes, and generally decline the fastest. As one of our Florida survey personnel commented within his report “the 2011s and 2012s are a tough sell”.

The bottom line is this late model used vehicle is a head to head comparison, and often cross shopped, vehicle to a new model which has some incentive help from various sources.

As we move solidly into May the aggressiveness is just not there and in many cases, as a dealer from Ohio and another from Wisconsin recently described to us, we are in a very selective market. Touching on fuel prices again, a dealer from Tennessee said “panic buying of economy cars is gone”.

With these varied comments, and movement in the market, at least with the Black Book data and tools, we are able to provide you with the most current market driven values, always updated on a daily basis.

Thank you for your business and let us know how you see the market when we meet you on the auction lanes.

It’s full steam ahead for our Editors in these specialty markets. With the economy continuing to steadily improve, consumer confidence is also at higher levels, thus loosening the grip on available spendable income. Let’s take a market by market look at the most recent trending of the values.

Motorcycles and Powersports:

Positive news on the economy, coupled with the annual spring selling season, is currently driving auction prices higher. This month nearly all segments in the Motorcycle & Powersports market are trending upwards, but at a slightly slower rate than April. This is especially true for the ATV segment which is only up by an average of $44/unit, or about 1.5 %. Most on and off-road bikes are showing solid gains averaging $55/unit, which is a 4.5% increase.

Personal Watercraft and Jet Boats are up around 5% as people around the country look forward to outdoor watersports activities now that warm weather is finally here. At the other end of the weather spectrum, Snowmobiles are down 3.5%.

The vast majority of street bikes and scooters are up by a little less than 3%, while the V-Twin heavy cruiser market is up by a little over 3%, with the 3 to 7 year old models showing the strongest gains. This continues a trend we noted last month, where older models are outpacing gains in 1 and 2 year old units. Rather than being a negative reflection on the newer models, we see this as a positive sign that the used market is gaining in overall strength.

For the past few years we have consistently seen the 1 and 2 year old units, especially the low mileage ones, hold their value better than older units as value conscious customers looked to buy used instead of new to save money, while still wanting “newer” units.

The return of a strong used market among the older vehicles hopefully indicates that we have once and for all turned the corner on the past several years of market volatility and generally softer values than we have seen since the recession began.

Recreational Vehicles:

Recreational Vehicle values continue their seasonal climb, reflecting strong performances at the wholesale auctions by all types of units. Motor Homes came in at an average wholesale price of $42,407, up $750 from last month (1.8%), and have increased an average of $4,953 for the year. Towables, including Travel Trailers, Fifth Wheels, and Camping Trailers averaged $10,891, a jump of $816 from last month (8%), and are up an average of $1,134 for the year.

Final April numbers are still coming in, but things look pretty strong, both in terms of bidders and sale prices. History tells us that RV values typically remain relatively unchanged throughout April, with May wholesale values beginning a gradual decline, probably due to the fact that many dealers have already acquired the majority of their inventory for the upcoming selling season.

We discussed the possible effects of rising fuel prices on RV sales last month, and are happy to report that we have seen no negative impact on values, and with fuel prices beginning to back off a bit, we do not foresee any fuel price related issues ahead in the near future. The lure of the RV and camping lifestyle has a pretty strong pull.

CPI Collectible and Exotic Vehicles:    

Collectible vehicle prices continue to rise across the board. Most American cars, including muscle cars, pony cars, and full sized postwar classics are up between 1% and 1.5%. Classic American pickup trucks have fared a bit better, up double the cars’ average at just over 3%. European sports cars have also been doing well, up about 4%, with the red hot vintage exotic segment up almost 10%.

The economy seems to be getting a little better every day, there is talk in the financial media of big IPOs and record profits and stock prices for big tech companies. Both housing numbers and unemployment statistics have been headed in the right direction recently. Perhaps collectors who have been sitting on the sidelines are becoming a bit more comfortable with the economy, and are ready to make the collectible car purchase that they had been putting off.

We will keep our eyes open for all the spring and summer auctions, shows, and cruise-ins around the country to see if and how long this strength continues.

Medium and Heavy Duty Trucks and Commercial Trailers:

The past month has seen a slight change in the Medium Duty side of the market. We had been seeing this segment staying fairly stable with just minimal price decreases. This past month, though not a large drop, we have seen the late model trucks have a bigger drop than in previous months. A trend that does continue, as in past months, is that the older models are still moving up slightly. As has been the case, there is still not a large inventory of used Medium Duty vehicles to choose from at the auctions. The best retention segment month over month is the Medium Duty Gas models. There has been a recent softening of fuel prices around the country; will this stop the drop in wholesale prices and maybe turn them back to the positive side? Only time will tell and once again we will be watching and reporting what happens.

May has brought us the first significant downward adjustment in heavy duty truck values in quite some time. They are not as dramatic as some articles have mentioned, but never the less, they are significant because they are across the board and we will not be surprised if this trend will be followed next month with a little heavier decline in values based on what we have seen at the auctions lately. It seems to be obvious, to me, that the turn ins on the large orders are still running on the roads and will probably be left in service even longer due to the cutbacks in the orders placed and the reduction in the number of new truck orders going forward. Dealers and buyers alike are finally realizing that the small number of clean available trucks is going to stay that way for a while. The trucking industry is determined to prevent the negative effects of a downturn in business like the one they have experienced in the past few years. They are going to do more with less equipment and not have trucks sitting at the terminal, not bringing in revenue. First quarter reports from truck lines, truck manufacturers, and various OEMs are showing good revenue and profit and could result in a record year for some industry members.

Commercial trailer values continue to climb as the value these used trailers provide is much stronger that the significantly higher new trailers. So, for right now, it’s Keep on Trucking and don’t look back.

We hope this insight into the specialty markets adds value to your business and helps you make better market decisions. To make money in the used market it is important to have inventory…and the right inventory at the market price. Let us know how you see the market when you see one of the Black Book specialty market editors on the auction lanes. Or feel free to give us a call or send an email. Have a great month!

This understanding has pushed some dealers in a positive direction. They are more market-smart as they set retail asking prices for used vehicles. They do not automatically apply a standard $3,000 or more mark-up to every vehicle they put up for sale.

But, while they may be seeing more customers, and selling more vehicles, many of these dealers believe they are not as profitable as they should be. “I’m selling vehicles but I’m not making any money” is a common refrain.

As I’ve discussed this with dealers, I’ve found two common problems.

First, dealers have a hard time looking beyond price as the chief way to drive used vehicle profitability. It’s a case where old beliefs and habits are difficult to break. It’s hard to accept that, in today’s marketplace, price is mostly a means to drive shopper interest and traffic. It’s not the dealer’s chief mechanism to control gross profits the way it used to be; the market is what it is.

Second, and perhaps most important, is that many dealers haven’t addressed the profit-draining inefficiencies in their used vehicle inventory management and sales processes. In effect, they are leaving money (and opportunity) on the table at each stage of a used vehicle’s lifecycle.

The following are three guiding principles to address these inefficiencies and improve used vehicle profitability:

Keep inventory fresh. Dealers all recognize that the freshest vehicles hold their mark-up and offer the greatest potential profit. Yet, many dealers remain undisciplined about managing the age of their inventory to offset the profit-eroding effects of depreciation and lost opportunities. In today’s environment, it’s essential for dealers to maintain at least 50% of their used vehicle inventories aged 30 days or less. Today’s technology and tools can help dealers make the acquisition decisions that ensure a fast turn, fresh inventory and profits for the dealership. The exciting part for dealers is the way faster inventory turn rates build even greater profitability potential. When this cycle of the right inventory at the right price repeats, dealers see both used vehicle sales volumes and profitability increase, and a larger departmental contribution their dealership’s bottom line.

Manage your inventory acquisition and add-on costs. Today’s competitive used vehicle marketplace means greater risks when dealers put too much money in a used vehicle. The good news is technology and tools are available to help dealers avoid making this mistake. These tools offer management metrics to ensure a vehicle’s acquisition price is “right” for a dealership (its cost-to-market ratio). This figure shows the “spread” between a vehicle’s wholesale acquisition cost and its most competitive retail asking price. With this, dealers can account for other potential drags on a used vehicle’s profitability—auction/transportation fees, reconditioning costs and packs. Of these, dealers have the most direct control over reconditioning costs and packs, and should manage these diligently to ensure neither erodes a vehicle’s investment and profit potential.

Another profitability booster: Acquire vehicles from your customers. More dealers are discussing new vehicle options (leases, in particular) with customers who own late-model vehicles that would be “right” for their used vehicle inventories. These discussions occur during BDC calls and customer visits to the service department. From a profitability perspective, these vehicles have excellent potential, particularly if a car’s “story” includes a single owner and regular trips to the dealership’s service department.

Be price transparent to “hold gross.” As noted above, today’s customers are price-savvy. They’ve shopped around and landed on a vehicle, at least in part, because of its price. More and more, dealers are openly addressing the “story” behind their pricing and using real-time market comparisons to demonstrate why a $12,750 sticker price really is “the best we can do for you on this car.” Velocity dealers who incorporate this transparency-minded approach into their sales processes rarely discount their asking prices and, if they do, the discount is typically less than $200 to close a deal. I believe such transparency is a more compelling proposition for today’s buyers—and the dealer’s profitability—than four-square and other traditional forms of selling.

Taken together, these principles will help those dealers achieve the return on investment they seek from their used vehicle operations. As noted above, in today’s market, used vehicle profitability is more about management, metrics and process efficiencies than price.

It’s been another busy week for our Editorial team as we have watched on-line, or physically attended, almost 40 auction sales this week, which goes along with the 62 auctions attended by our survey team. We also received and included in our analysis actual sold vehicle information from an additional 21 separate data feeds that covered even more auction locations.

During the week I had the opportunity to talk with the leading group of fleet management companies that specialize in working with the transportation needs of small businesses, those who might need from 5 to 50 units, as part of the annual NVLA Conference. Their insight into the market helps us understand some of the market trends and issues that many of you face in your buying, remarketing, and inventory management needs and efforts.

I also spent part of one day with a group of hands on people who provide dealer valuing solutions, and getting to know how they are seeing the market. Couple these two events with also meeting with the fleet, remarketing, and CPO teams of a manufacturer who visited our offices, and I must say it has kept us busy and focused on the current market.

Let’s take a look at the results of this insight and the most recent week of analysis. The various comments we heard at auctions and through the survey personnel reports from across the country truly covered all aspects of activity. We heard that “dealer consignment lanes struggled” and “there were more no-sales within the 2011 and 2012 models”. From opposite sides of the country we heard “Full-size pickups and full-size SUVs are not selling well” to the “economy cars are in demand”.

Another interesting comment raised the thought that it has been a challenge during the tight supply of used vehicles over the past couple of years to obtain the right vehicle mix.

We also heard that aggressive bidding has continued to slack off. That was evident as the percentage of increases within the adjustments was less than 50% for the first time within the past 9 weeks, this week at 44%.

Overall the cars declined an average of $13 per segment type, which translates to a meager -.1% decline. It was a more stable car market across the segment types as the range of adjustments within the segments was the smallest since February, if the largest declining segment for the week, the Premium Sporty cars (PSC) at -$96, was excluded from the mix. Otherwise, the Compact Cars (SCC) which increased by $13, down to the -$20 change for the Entry Sporty Cars (ESC), kept the variance pretty tight.

Trucks came in at a 50% level of increases and declines in value changes by segment type. The overall average segment change of -$14 or -.11% was led by the $46 increase within the Full-size Crossovers (FXU) and the Full-size SUVs (FSU) at +$34. The Full-size SUVs are now on an 8 week run of increasing average change. The remaining 5 increasing segment types were all single digit increases. The Luxury SUVs (LSU) still led the declining segments at -$119 for the past week which was significantly less of a decline than the previous weekly change.

The other declining trending we are tracking, which is a positive for our transportation expenses, is the price of gas at the pump. The price per gallon dropped $.05 week over week to a national average of $3.87. This is a $.07 drop in the last month and brings us to the lowest price since the week of March 19. Let’s hope this declining trend continues.

As the week progresses, we will be on the auction lanes where the market is established, reporting the trends and changes. We welcome your comments as to how you see the market. Will we hear again, as one dealer in Texas said, “it’s a seller’s market. There are no bargains here”? Have a great week!

Ricky Beggs

Last week we made mention of an easing in the push for an extra bid or two. That trend continued into the past week within the cars as the overall average segment change grew to -$9 from the previous -$2 weekly change. The four car segments that increased this past week have been consistently strong over the last two months. The Upper Mid-size Cars (UMC), up by $27, have increased for the past eight weeks. The remaining three increasing segments have all increased nine of the previous ten weeks. The Compact Cars (SCC) and the Entry Level Cars (ELC) both increased $19 for the week. The final increasing segment was the Entry Mid-size Cars (EMC) which finished $8 stronger for the week. On the other end of the change spectrum, the three segments with the longest declining streak consist of the Premium Sporty Cars (PSC) down by $80, the Luxury Level Cars (LLC) which declined by $24, and the Prestige Luxury Cars down by $37.

The price of gas and diesel at the pump has declined ever so slightly over the past two weeks, down almost $.02 for gas and $.015 on diesel. It’s probably not enough for any of us to feel better when we fill our tanks, nor was it enough of a change to drive the market adjustments in a directly connected manner.

There was an uptick in the number of truck segments increasing to eight of the fourteen segments this week from only five the previous week. The overall average change was consistent at -$11 for the second consecutive week. Six of the eight increasing truck segments have been in a positive trending mode for five of the past six weeks for the Full-size Pickups (FPT), to as long as nine of the past ten weeks in the Compact SUVs (CSU). Even though the Luxury SUV (LSU) segment has a small number of models in the segment, there was enough softness in values of a couple of those individual models to have the segment decline by 1.14% during the past week. There was still plenty of activity as the past week’s worth of data required over 2080 daily adjustments, the second highest number over the past five weeks.

What do we expect to see in the market this coming week? Even with looks of amazement at the strong values, retail activity is requiring the dealers to return to the auction lanes and airwaves to restock their depleted inventory.

The percentage of adjustments that were increases over the past week supports a solid market, but not hardly as aggressive as the previous eight weeks. The 51% that were increases during the most recent reporting period still represents solid demand within the used market and an economy that is gradually moving from “need” only purchases to some that fit in the level of “want”.

Please check back with us next week to see the market summary from a fresh week of auction sales and remarketing activity.

Have a great week!

What I am hearing from dealer calls and scores of group situations that I am in, such as a training class when gross income comes up, is that front end seems to be dropping across the board. Now, this didn’t happen over the last eight to ten months like all of a sudden everybody being hit by a flu bug. So, what is the reason for it?

First, let’s take away the myth that Cash for Clunkers hurt the availability of good pre-owned cars. The cars that you acquired for $4,500 under a Cash for Clunkers deal are not vehicles that you would have retailed in the first place. The people that were hurt by that Cash for Clunkers were the independents.

Also, we all know that the values of pre-owned vehicles are at a premium. Pre-owned vehicles are sold by new car dealers, independent dealers and private individuals. Currently, private individuals are by far doing the best job of getting the quickest turn rate at the highest front end gross.

Here is my assessment of why new car dealer front end gross has dropped. In reviewing the stores who are complaining about their grosses dropping, I ask them how they start pricing their inventory. Every conversation centers around competitive Internet pricing based on sell price statistics that are being obtained in their market. I want you to stop and think about that without me having to spell it out for you. Private individuals certainly do not use that method to set their vehicle sell prices, and their gross in the same market far exceeds yours! Gross is a state of mind of the salesperson presenting a vehicle for sale. That is the art that we have lost by getting entangled in the World Wide Web.

‘Til next month, just my opinion, but chew on that pork chop for a while.

Spring break has come and gone in most parts of the country, and instead of an increase in activity at the auctions, things seemed to have slowed down just a bit. The demand from multiple buyers pushing for an extra bid or two has disappeared in many cases. Reports were mostly made up of comments like “small cars in demand”, “low mileage economy models are up”, “SUVs slightly off” and “trucks not slowing”.

After completing the analysis of all of the data, the final results brought a drop in average price of the car segments of -$2. This follows 5 weeks of increasing values. For the past two weeks 5 of the 10 car segments increased. This most recent week the strength was led by the Compact Cars (SCC) which increased by $27 or +.4%. The Premium Luxury Cars (PLC) declined by .2% or -$48.

Looking in more detail at the truck segments we finished the week with an overall decline of $11. This was the first decline overall in the past 6 weeks. With only 5 individual segments increasing within the trucks, this was the smallest number as at least 8 segments increased each week over the past 5 weeks. The Compact SUVs (CSU) increased but $39 or .4% as the strongest segment improvement. The Luxury SUVs (LSU) declined by $88 or -.3%, while the Full-size Crossovers weren’t far behind at -$82 or .4%.

Overall there were fewer necessary changes, 1487 per day, than the previous four weeks when the average daily adjustment was at 2041 per day. Within all the changes we made it back to the 60% level of increases that we have had for 4 of the previous 5 weeks.

In addition to tracking and reporting the used market, we spent some time this week getting an up close detailed presentation on two new models. With the increasing CAFÉ requirements of 35.5 MPG by 2015, these two models are part of the offerings from Ford to help them meet those requirements.

We started by reviewing the latest technology behind the new 2012 Ford Focus Electric, 5 passenger 4 door hatchback. This vehicle leads the electric car segment with an equivalent of 105 MPG and a very adequate total electric driving range. With regenerative braking there were times during our test drives that the range of mileage on the very informative instrument panel actually remained the same or increased.

Upon first visual look, only the plug in door, unique front grille, and some external electric badging would keep you from thinking this was not the traditional Focus. After driving the car, the handling, performance, braking, comfort and solid feel all say that this “is a real car”. Sure hybrids and electrics are currently only a minimal percentage of the total cars being sold in the US, but with the technology within this latest player in the electric segment, this car can only add to the confidence of potential owners.

Our second day in the Los Angeles area brought us rain and wind while we had the opportunity to drive the totally redesigned Ford Escape Compact Crossover (CXU). In order to stay competitive in any market segment, updates and redesigns are the key. The changes made to both the exterior and interior meet and even exceed these current needs. Not only did the Escape receive visual changes, but the drivetrain and suspension upgrades provide impressive performance, solid handling, and strong fuel economy levels. 2013 models will not have an optional hybrid configuration that has been a part of Escape line since the 2005 models. The impressive 1.6L and 2.0L Ecoboost engines provide even better fuel economy.

With trim level designation changing to the car format of S, SE, SEL and Titanium, all trim levels except the entry level S models will be visually badged, greatly assisting the used market buyers as to proper trim level and value.

For our lender or lessor customers, the Black Book residual value projections for these and other new 2013 models will soon be published. Give us a call at 800.554.1026 on how you can receive these vehicle value projections. We hope you have a great week and we hope to see you on the auction lanes.

Ricky Beggs

This is becoming a significant problem. Some dealers estimate more than 50% of the vehicles available via online auctions from dealers lack any information about condition or history, let alone photos. “These cars are blind to those of us buying through simulcast and proxy bidding,” notes a South Carolina dealer. “I might take an occasional chance on one of these cars, but I mostly let them pass.”

I recognize why dealers may be reluctant to offer this information on wholesale vehicles. First, it’s an extra step that didn’t exist in the past. Historically, when dealers had a wholesale unit, they’d call someone to take it to auction or buy it outright. Done. Simple as that.

In today’s environment however, is different. Vehicles destined for a physical auction likely have as many, if not more, potential buyers using online simulcast and proxy bidding to acquire vehicles rather than standing in the lanes. These online buyers can’t physically touch the units, so they rely on condition reports, photos and other information prior to bidding.

This pool of potential online buyers should be incentive for dealers to provide as much information as they can on a vehicle’s condition and history to raise its prospects and, potentially, its wholesale price point. Some dealers understand this, and they’re providing this information, viewing it as a competitive advantage.

More broadly however, the dearth of condition reports is just one of several inefficiencies that exist in today’s online auction environment. Dealers and used vehicle managers say they have doubts about the efficacy and transparency of proxy bids, and they cite staff and time constraints as reasons they cannot diligently participate in simulcasts.

I’ve been addressing the issue of online auction efficiency with auction executives and dealers across the country. I believe this medium represents the “last mile” for dealers to most effectively execute the third leg of a strategy for “provisioning” inventory—first you identify what to buy, next what to pay and, finally, where to find the vehicles for acquisition.

From these discussions, I’ve gained confidence that auction providers are aware of and committed to finding solutions that fix the inefficiencies and provide more transparency in dealer bidding processes. I’ve also identified a few areas where dealers themselves could become more effective and efficient participants in online auctions and better stewards of a “provisioning” strategy for their used vehicle inventories:

• Use simulcast and proxy bids in tandem. This approach follows recognition that most used vehicle managers have multiple responsibilities. They actively monitor the simulcast auctions where they expect to find the greatest number of vehicles they need, and use proxy biddings to ensure they’re still in the game when they’re called away to complete an appraisal, desk a deal, etc.

• Mind your “proxy bid discounting.” Several dealers have mentioned that they’re gun-shy about their proxy bid maximums, dubbed “proxy discounting” by some. The thinking: “If I win every car, I may own too many but I’ll own them right.” Typically, though, these dealers also have the lowest bid-to-close ratios because they set their maximum bids at less than what they know they might pay to acquire a unit and meet their profit goals at retail. Today’s technology and tools can eliminate any guesswork about the “what to pay?” leg of the provisioning strategy and give dealers confidence in maximum bid amounts to offset the tendency toward discounting proxy bids.

• Pick your spots to pay up. While I’m the last one to advocate irrational bidding at auctions, I will submit that there are times when going beyond a target acquisition price by $100 to $300 makes sense to meet broader inventory needs and goals. In my view, this is a rational decision and one that dealers should account for as they set their simulcast and proxy bidding strategies and targets. Let’s remember, it sometimes pays not to leave an auction empty-handed if your dealership knows how to account for less-than-ideal profitability on a specific vehicle.

•  “Go where they ain’t.” This borrows from Major League Baseball Hall of Famer Willie Keeler’s guidance to hitters: “Keep your eye clear, and hit ‘em where they ain’t.” It’s an apt way to approach online auctions, particularly for dealers with technology and tools to ID the specific lanes that will feature the vehicle you need. “If I need a Nissan, I’m going to look at non-Nissan lanes to see if I can catch a Chevy dealer who’s trying to get rid of one,” the South Carolina dealer says.

As I led off a webinar this past week with a great business partner from the financial industry by saying “spring has sprung”, I was not only thinking about how great the weather has been over most of the country, but the enthusiasm from the consumer side as new and used car sales have blossomed.

We are now past the prime tax season, and from our observations on the lanes, along with comments from several auctioneers, the push for the extra dollar is not as strong as it was a couple of weeks ago. This trend was also prevalent when only 59% of the adjustments this past week were increases in value. This is the first time in the last 5 weeks where the positive adjustments fell under the 60% level, a sign of a less aggressive market, but still a strong and stable market.

As we look at the overall changes within the car and truck segments the +$1 change for both segment groups is the 4^th consecutive week of positive change for the cars and the 5^th week for the trucks. One half of the car segments increased while 8 of the 14 truck segments increased over the past week. The greatest segment increase in the trucks was with the Compact SUVs (CSU) at +$41 and an identical +$41 increase for the Entry Mid-size Cars (EMC), which have increased for the past 6 weeks. Another fuel efficient segment, the Compact Cars (SCC) increased by $25 this past week, now has 8 weeks of positive trending. The bottom line is the market continues the positive trend, while it is at a slightly lesser level.

Gas prices at the pump, which continue to be a primary topic around the water cooler, climbed another $.02 to $3.94 per gallon national average. Even as a the price inches closer to the $4.00 level, this week 57% of the truck segments had a positive change in values. This is another sign of the interest and need for trucks and utilities, along with a very manageable volume of these used units in the market.

We are anxious to see how the market reacts this week and report the results with our Daily adjustments, available on your desktop or mobile handheld device with fresh values every morning. We hope you have a great week and look forward to seeing you on the auction lanes.

Ricky Beggs

What I am hearing from dealer calls and scores of group situations that I am in, such as a training class when gross income comes up, is that front end seems to be dropping across the board. Now, this didn’t happen over the last eight to ten months like all of a sudden everybody being hit by a flu bug. So, what is the reason for it?

First, let’s take away the myth that Cash for Clunkers hurt the availability of good pre-owned cars. The cars that you acquired for $4,500 under a Cash for Clunkers deal are not vehicles that you would have retailed in the first place. The people that were hurt by that Cash for Clunkers were the independents.

Also, we all know that the values of pre-owned vehicles are at a premium. Pre-owned vehicles are sold by new car dealers, independent dealers and private individuals. Currently, private individuals are by far doing the best job of getting the quickest turn rate at the highest front end gross.

Here is my assessment of why new car dealer front end gross has dropped. In reviewing the stores who are complaining about their grosses dropping, I ask them how they start pricing their inventory. Every conversation centers around competitive Internet pricing based on sell price statistics that are being obtained in their market. I want you to stop and think about that without me having to spell it out for you. Private individuals certainly do not use that method to set their vehicle sell prices, and their gross in the same market far exceeds yours! Gross is a state of mind of the salesperson presenting a vehicle for sale. That is the art that we have lost by getting entangled in the World Wide Web.

‘Til next month, just my opinion, but chew on that pork chop for a while.

Welcome to this week’s edition of Beggs on the Used Car Market. Thanks for tuning in today for our recap of the used market activity over the past week. As the survey reports and summaries arrived at the Editorial offices, there was a consistent pattern of comments regarding one segment of the market. Four cylinder and fuel efficient cars are “a hot item”, while more times than not, the reports included a comment that “the market is still strong”.

With all the attention on the current level and steadily moving gas prices, we are faced with another $.05 week over week change to a national average of $3.92. Over the past 2 months we have had an average increase of $.06 per week. This has had a consistent and positive affect on four of the car segments. For the past seven consecutive weeks, Compact Cars (SCC) and Entry Level Cars (ELC) have increased, while two other segments, Entry Mid-size Cars (EMC) and Upper Mid-size Cars (UMC), have increased in value for the past five weeks.

With gas prices obviously being a push for the fuel efficient models, some would initially think the opposite would be happening with the trucks and utility models. For the past two weeks, ten of the fourteen truck related segments have increased week over week. Three and four weeks ago nine of the fourteen segments increased. It’s obvious there is a stronger need for the trucks than the drag of the gas prices holding them back. There are seven truck related segments with four consecutive weeks of increasing values, including utility vehicles, minivans, and Mid-size Pickups (MPT). Full-size Pickups (FPT) have increased for the past 3 weeks.

As the data arrived and the Editors completed their daily analysis, the number of necessary adjustments was the smallest of the past month. Overall this was the second consecutive week of more than seventy percent of the adjustments being increases with each of the last 4 weeks being higher than sixty six percent.

With the movement in the market we have been dealing with over the past several months, having the most current market driven values to help determine how to buy, sell, or finance is of utmost importance. That’s why the Editors regularly attend a physical auction at least once a week while also watching numerous auctions online throughout the week to get a timely hands-on feel. And every day throughout the week we adjust vehicle values based on the auction data. Maybe the next late model vehicle you need to put a trade value on or some 2012 model appears at the auction that catches your eye will have a market driven value. This past week over 25 additional 2012 models received their initial values based on auction activity.

With this being the first of the month there is a new current specialty market video posted on the BlackBookUSA website. Now would be a great time to check out the market trends if you ever deal with a motorcycle, RV, collectible car, or a medium or heavy duty truck.

The market is just as hot and exciting as the Final Four will be on Monday night. With our market values, your odds are better than having selected the correct final four bracket picks throughout March Madness. Have a great week and we’ll be looking for you on the auction lanes this week.