GUIDELINES NADA Used Car Guide Industry Update March 2010
At NADA Used Car Guide What s New... In February, NADA Used Car Guide expanded its electronic product line to include the Auction Values (High, Average, Low). These new values are updated weekly to help you better understand pricing activity for the disposal or purchase of a vehicle in the dynamic auction remarketing channel. Auction values are available at no additional cost to subscribers to NADA s electronic products, including NADA Online, NADA e valuator, NADA e valuator for Dealers and NADA Web Service. Feel free to contact us to discuss the Auction Values in detail or find out how you can access them, 800.544.6232 and www.nada.com/power. Pulling from an industry leading data source, these new values provide spot pricing for our customers, rounding out our valuation offering of our tried and true monthly trend values, Trade In (Rough, Average, Clean), Loan and Retail. NADA is your one source for all your vehicle values, covering the lifecycle l of a used vehicle. On the Road In early April, our Credit Union Account Executive, Doug Ott, will be at the Texas Credit Union League Meeting & Expo at the Gaylord Texan Resort April 6 th 9 th. Please contact Doug if you ll be in attendance and would like to set up a meeting. For more information on the show itself, go to http://www.tcul.coop/annual_meeting.html. Also, Chris Visser, Editor, Commercial Trucks, will be at the ATD Expo in Orlando April 23 rd 26 th. Attend the show and keep up with the latest changes and innovations in the marketplace. To learn more or register, go to http://expo.nada.org/atd2010/. page 2 p. 2
NADA Official Used Car Guide & ATD/NADA Official Commercial Truck Guide Data p. 3
The Toyota Recall Six weeks have passed since the announcement of Toyota s recall of over 2 million of its most popular vehicles. The recall announcement surprised many consumers and created daily headlines centered around Toyota s handling of the recall and the extent of the problems. The news hit a crescendo with government probes, additional quality concerns, and a testimony from CEO Akio Toyoda defending and apologizing for the company. Most of the daily coverage has subsided but the saga is far from over. Toyota has now implemented strategies to regain consumer confidence and jumpstart sales. Toyota has resurrected zero percent financing on their high volume models, which continues an increasing incentive trend that started in the third quarter of 2009. These eventshave stirred up many questions on what the impact will be on auction performance and residual values for Toyota products as consumer uncertainty and new vehicle incentives will put downward pressure on used car prices. NADA has analyzed this situation and aligned our values to incorporate some of the risk associated with the recall and the following pages provide some insight on Toyota s actual auction performance based on data collected by NAAA which represents approximately 80% of the transactions going through the auctions. Methodology: Baseline data was derived from NADA s AuctionNet wholesale auction database. Average price data has been adjusted for mileage, mix, and age in order to remove any arbitrary volatility caused by these variables. All data was indexed on 1/25/2010, or the date on which Toyota announced the gas pedal recall covering 2.3mi vehicles. Each trend should be viewed as pre and post period auction performance relative to the gas pedal recall date (either plus or minus). Competitive sets are as follows: Camry Chevy Malibu, Ford Fusion, Honda Accord, Hyundai Sonata, Mazda Mazda6, Nissan Altima, Pontiac G6, Subaru Legacy. Prius Chevy Cobalt, Ford Focus, Honda Civic, Hyundai Elantra, Nissan Sentra, Subaru Impreza, Volkswagen Jetta. Tundra Chevy Silverado, Dodge Ram, Ford F Series, GMC Sierra, Nissan Titan. Source: NADA Used Car Guide p. 4
The Toyota Recall 115% Toyota Recall Impact: Toyota v. Ford* 2007 2010MYs 115% Toyota Recall Impact: Toyota Camry v. Competitive Set* 2007 2010MYs 110% Ford Toyota 110% Comp Set Camry 105% 105% 100% 100% Index (1/25/10 = 100) 95% 90% 85% 1/25/10 Gas Pedal Recall Index (1/25/10 = 100) 95% 90% 85% 1/25/10 Gas Pedal Recall 80% 80% 75% * Data has been adjusted for Mileage, Mix, and Age. 75% * Data has been adjusted for Mileage, Mix, and Age. Source: NADA, AuctionNet Calendar Week Source: NADA, AuctionNet Calendar Week Toyota Recall Impact: Toyota Prius v. Competitive Set* 2004 2009MYs Toyota Recall Impact: Toyota Tundra v. Competitive Set* 2007 2010MYs 120% 115% Comp Set Prius 11/21/09 Floor Mat Recall 115% 110% Comp Set Tundra 110% 105% 105% 100% Index (1/25/10 = 100) 100% 95% 90% 85% 80% 75% * Data has been adjusted for Mileage, Mix, and Age. 1/25/10 Gas Pedal Recall Index (1/25/10 = 100) 95% 90% 85% 80% 75% * Data has been adjusted for Mileage, Mix, and Age. 1/25/10 Gas Pedal Recall Source: NADA, AuctionNet Calendar Week Source: NADA, AuctionNet Calendar Week NOTE: All data is through the week of 3/8/2010. Source: NADA Used Car Guide p. 5
Toyota Comments: The Toyota Recall 2010 auction prices experienced above average seasonal patterns with increases occurring after the down months of November and December. In fact, initial auction data for March shows a 7% increase in prices over the low points in December, which represents approximately two times the expected seasonal impact for this period. Seasonal increases occurred on most segments and Toyota followed a similar trend until late January. Since late January however, auction prices for Toyota models have underperformed competitive products by a dramatic amount. For example, in the case of the Camry these vehicles have lost approximately 10% of their price competitiveness to competitive models, while on a brand level Toyota has lost 7% of their price advantage relative to Ford. Although it is difficult to isolate the impact the recall has on auction prices, especially since Toyota incentives have increased by ~20% from January to February, there is no doubt that Toyota values are lagging behind the competition. Honda for example has implemented a more aggressive incentive program than Toyota by increasing average incentives by over 25% from January to February but still outpaces the price performance of comparable Toyota models. NADA forecasts a strong used market during the next few months which will help mitigate the decline in auction prices for Toyota models, but with incentives for Toyota models increasing during March, auction volume increasing, and the continuation of negative press it is likely that Toyota prices will continue to slip against primary competitors. NADA values for the March publication incorporated the softness expected to occur in the market and auction values for the first2 weeks of March support NADA s downward adjustments. Toyota auction prices are expected to continue to follow moderate declines while strength in the overall market will continue. Incentive spending initiated by Toyota has already prompted a response from key domestic and import competitors and has clearly created a profound increase in sales, which points to a continuation of incentive spending and more pressure on auction prices for both Toyota models and substitute products. This is expected to mitigate some of the expected positive seasonality which normally occurs during the Spring market. Source: NADA Used Car Guide p. 6
Industry Comments Auction prices for virtually all vehicle segments showed positive movement during the first two weeks of March following typical seasonal trends. Constrained supply and strong demand for used models added to the expected seasonal strength in the used market, and as we move deeper into the Spring selling months with weather conditions improving and the ubiquitous negative information regarding Toyota subsiding prices are expected to continue to follow typical seasonal gains. Auction prices for all 1 5 year old models during the first 2 weeks of March are posting a 7% increase over December s low point and a 3% increase over February prices. The increases are consistent on all truck, CUV and SUV segments with more moderate seasonal effects on the luxury counterparts. Passenger car price increases are generally tracking below the industry average with luxury cars posting the smallest seasonal effects of all segments. Older model auction prices continue to lead the surge in price increases with 2004 & 2005 model years posting significantly higher percentage increases than newer counterparts. With consumer confidence at a 27 year low and unemployment remaining over 10% most consumers are not going to commit to an expensive vehicle purchase. Instead consumers are opting for lower price alternatives and dealers clearly are reflecting this by paying more for these vehicles in auctions. NADA expects this trend to be bolstered by the upcoming tax season which traditionally brings buyers into the market looking for affordable vehicles using tax refunds as down payments. New car sales for early March are tracking well above the 10.4M SAAR experienced in February. This is good news, but is coming at a cost since incentives are the catalyst of the increase in sales. The major manufacturers have raised incentives across the board to align themselves with Toyota s aggressive 0% financing and other lease deals, and this is coming on the heels of an already increasing incentive trend for many manufacturers. If incentives persist at these higher levels, as many analysts predict, this will cause downward pressure on resale values by shifting consumers from the used to the new market, while concurrently increasing used supply from vehicle trade ins. Crude oil continues to trade slightly above $80, similar to last week and the consensus is that short term price increases over the next month will be modest. OPEC announced that their production levels will remain the same and they are actually pleased with $80 bbl so there should be no production restraint in the near future. This will support the strong prices we have witnessed on trucks and doesn t present any red flags on potential demand shifts away from truck segments. Source: NADA Used Car Guide p. 7
Used Car Guide (UCG) Value Trend Used Car Guide: Monthly Change in NADA Average Trade In Eastern Edition Intermediate Mid Size: 12 mo. Change in NADA Average Trade In Eastern Edition 5.0% CY10 YTD = 3% 4.0% 0.5% % Change From Previous Edition 3.0% 2.0% 1.0% 1.0% % Change From Previous Edition 1.0% 1.5% 2.0% 2.5% 3.0% 2.0% 3.0% 3.5% 4.0% CY10 YTD = 3% NADA Guidebook Edition NADA Guidebook Edition Luxury Mid Size: Monthly Change in NADA A Average Trade In Eastern Edition Large SUV: Monthly Change in NADA A Average Trade In Eastern Edition % Change From Previous Edition 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% % Change From Previous Edition 1 8.0% 6.0% 4.0% 2.0% CY10 YTD = 5% 4.0% CY10 YTD = 3% 2.0% 4.5% 4.0% NADA Guidebook Edition NADA Guidebook Edition Source: NADA Used Car Guide p. 8
Commercial Truck Guide Update The volume of used Class 8 truck sales reported to us in January represented the third monthly increase in a row. This increase was likely due to trade in activity as the last of the pre 2010 emissions trucks were delivered to customers. With new Class 8 sales numbers down for January (vs. December), we predict a relaxation of used truck sales volume as well. Selling prices appear to have been relatively unaffected by the short term increase in sales volume. Depreciation remained moderate, with the usual primary factors (mileage and cab configuration) determining the value of a used truck. Class 8 construction trucks continue to lose value at a moderate rate. While demand for these trucks is low, the overall supply on the used market appears to be relatively low as well. These factors are likely keeping selling prices from decreasing too heavily. No apparent increase in sales volume of medium duty trucks, which suggests a minimal or nonexistent prebuy for that segment. Medium duty depreciation seems to have flattened out in the third quarter of 2009, with selling prices bouncing along the bottom since then. No real change in selling prices for most segments of that market save for the heaviest weight classes, which have exhibited a more noticeable downward trajectory. This movement may be due to the exposure of those vehicles to the construction market. p. 9
Commercial Truck Guide (CTG) Value Trend Overall Class 8: Monthly Change in NADA Average Wholesale Extended Hood: Monthly Change in NADA Average Wholesale 2.0% % Change From Previous Edition 2.0% 4.0% 6.0% 8.0% % Change From Previous Edition 2.0% 4.0% 6.0% 8.0% 1 1 CY10 YTD = 3% 12.0% CY10 YTD = 8% 12.0% 14.0% NADA Guidebook Edition Highway Aerodynamic: Monthly Change in NADA A Average Wholesale NADA Guidebook Edition Medium Duty Conventional: Monthly Change in NADA A Average Wholesale 4.0% 4.0% 2.0% 2.0% % Change From Previous Edition 2.0% 4.0% 6.0% 8.0% 1 12.0% % Change From Previous Edition 2.0% 4.0% 6.0% 8.0% 1 14.0% CY10 YTD = 7% 12.0% CY10 YTD = 2% 16.0% 14.0% NADA Guidebook Edition NADA Guidebook Edition Source: NADA Used Car Guide p. 10
Wholesale Market AuctionNet Data AuctionNet is an industry unique wholesale transaction database, available exclusively from NADA Used Car Guide, in joint partnership with the National Auto Auction Association (NAAA). Over 90 million records strong and updated weekly, it captures sales from all Manheim and ADESA, as well as participating ABC, ServNet and large independent, auctions, representing over 80% of nationwide auction activity. p. 11
Monthly Wholesale Prices Monthly AuctionNet Price Change: 1 to 5 yr. Old Vehicles* Jan 10 vs Feb 10 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% CAR CUV Pickup SUV VAN *Figures have been adjusted for both Mileage & Mix Vehicle Segment Source: AuctionNet p. 12
Year-Over-Year Wholesale Prices Y O Y AuctionNet Price Change: 1 to 5 yr. Old Vehicles* Feb 09 vs Feb 10 25.0% 2 15.0% 1 5.0% CAR CUV Pickup SUV VAN *Figures have been adjusted for both Mileage & Mix Vehicle Segment Source: AuctionNet p. 13
Initial March Wholesale Prices Week 1 Initial Monthly AuctionNet Price Change: 1 to 5 yr. Old Vehicles* Feb 10 vs Mar 10 (Week 1) 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% CAR CUV Pickup SUV VAN *Figures have been adjusted for both Mileage & Mix Vehicle Segment Source: AuctionNet p. 14
Segment Price Trends $20,000 Average AuctionNet Price by Segment: 2005 2009 MYs* Feb 09 thru Feb 10 $19,000 $18,000 $17,000 $16,000 Price $15,000 $14,000 $13,000 $12,000 $11,000 $10,000 $9,000 CUV Passenger Car Pickup SUV Van *Figures have been adjusted for Mileage Sale Month Source: AuctionNet p. 15
Retail Sales Data p. 16
New Vehicle Sales 12 CY09 vs. CY10 New Vehicle Sales: Total New Vehicle Sales: Passenger Cars & Light Trucks 2009CY 2010CY 1.4 Trucks Cars 10 1.2 Volume (Millions) 8 6 4 Volume (Millions) 1.0 0.8 0.6 0.4 2 0.2 0 0.0 Source: Global Insight Month Source: Global Insight Month New Vehicle Sales: Seasonally Adjusted Annual Rate New Vehicle Sales: Year Over Year Change 16 20% 14 10% 12 0% Volume (Millions) 10 8 6 % Change 10% 20% 4 30% 2 40% 0 50% Source: Moody's Databuffet Month Source: Moody's Databuffet Month p. 17
Used Vehicle Sales 40 CY09 vs. CY10 Used Vehicle Sales: Total 80 Used Vehicle Days' Supply 20% 2009CY 2010CY Days' Supply % Change 35 70 10% 30 60 0% Volume (Millions) 25 20 15 Days' Supply 50 40 30 10% 20% 30% % Change 10 20 40% 5 10 50% 0 0 60% Source: CNW Month Source: CNW Month Monthly Used Vehicle Sales Used Vehicle Sales: Year Over Year Change 5.0 10% 4.0 5% Volume (Millions) 3.0 2.0 % Change 0% 5% 10% 1.0 15% 0.0 20% Source: CNW Month Source: CNW Month p. 18
NADA s Gasoline Forecast $4.50 $4.25 NADA Forecast: Monthly Average Price of Unleaded Gasoline March 2010 Actual Forecast (S.E. 1, Baseline, S.E. + 1) $4.00 $3.75 $3.50 Pr rice p/gal. $3.25 $3.00 $2.75 $2.50 $2.25 $2.00 $1.75 $1.50 $1.25 Month Source: Moody s Databuffet, NADA p. 19
NADA s Diesel Forecast Price p/gal. $5.00 $4.75 $4.50 $4.25 $4.00 $3.75 $3.50 $3.25 $3.00 $2.75 $2.50 $2.25 $2.00 $1.75 $1.50 $1.25 NADA Forecast: Monthly Average Price of Diesel Fuel March 2010 Actual Forecast (S.E. 1, Baseline, S.E. + 1) Month Source: Moody s Databuffet, NADA p. 20
Contacts Financial/Legal/Analysts Steve Stafford 800.248.6232 x7275 sstafford@nada.org Credit Unions/Fleet/Leasing/ Rental/Government Doug Ott 800.248.6232 x4710 dott@nada.org Dealers/OEMs/Captive Finance Yvonne Porter 800.248.6232 x4724 yporter@nada.org Value Added Resellers (VARs) Jim Gibson 800.248.6232 x7136 jgibson@nada.org Media Jeff Beddow 703.304.8117 jbeddow@nada.org Director, Sales and Customer Service Insurance Dan Ruddy 800.248.6232 x4707 druddy@nada.org NADA Used Car Guide makes no representations about future performance or results based on the data and the contents available in this report ("Guidelines"). Guidelines is provided for informational purposes only and is provided AS IS without warranty or guarantee of any kind. By accessing Guidelines via email or the NADA website, you agree not to reprint, reproduce, or distribute Guidelines without the express written permission of NADA Used Car Guide. p. 21