Strong New-Car Sales Won't Hurt Fleet Remarketing, Says Black Book

Strong new-car sales shouldn't hurt newer model-year fleet vehicles with comparable mileage at remarketing auctions, according to one of the industry's top remarketing analysts.

A rising tide of new-vehicle sales since the recession low of 10.3 million vehicles sold in 2010 will cause a spike in the number of retail trade-ins and lease returns competing with fleet vehicles at auto auctions, said Ricky Beggs, senior vice president and editorial director for Black Book.

However, these retail vehicles will likely be five- to seven-year-old vehicles compared with a comparable fleet vehicle with 30 to 42 months of usage. The vehicles will likely have comparable mileage, which may give the fleet vehicle an edge because it's a newer model year, Beggs said Tuesday.

"You're going to have a little newer car, but with similar mileage," Beggs said. "So it may push that consumer as a good buyer for that commercial fleet car. Will it change the value? Probably not. But it will help that higher-mileage fleet car have a little more interest to the consumer, and it might help it sell quicker."

In 2013, automakers sold about 15.5 million new vehicles in the U.S. market. Beggs expects 16.1 million new cars to be sold in 2014.

Used-vehicle retention has steadily eroded since 2010 as more used vehicles vehicles enter the market, but remains above pre-recession levels. Vehicles depreciated an average of 12.8 percent in 2013 compared with 12.4 percent in 2012. Prior to the recession, vehicles typically depreciated about 15 percent a year, Beggs said.

Several factors are causing vehicle depreciation to increase, including the ending of the Cash for Clunkers program in which 750,000 high-mileage used vehicles were taken out of circulation in 2009 and turned into scrap in exchange for a payment from the federal government.

Also, when new-vehicle sales increase, more trade-ins reach the used-vehicle market. In 2010, about 6.2 million trade-ins reached the used-vehicle market. In 2013, there were about 9.3 million. About 60 percent of new-vehicle sales result in a trade-in or lease return, Beggs said.

By Paul Clinton

Editor's note: Ricky Beggs and other experts will discuss residual values in 2014 and 2015 as part of a March 6 panel at the Conference of Automotive Remarketing in Las Vegas.

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Originally posted on Automotive Fleet