High Yield New-Car Owners Not Convinced Electrics are for Them

November 2014 High Yield New-Car Owners Not Convinced Electrics are for Them Even if electric vehicles had identical prices as comparably sized and type gas or diesel powered cars, the vast swath of High Yield new-car customers would ignore battery power. First a definition: High Yield (HY) new-car owners are those who currently own a vehicle similar in size, seating capacity and volume as the current EV offerings and purchased their primary household vehicle as a new car or truck. HY households also have a secondary vehicle that was purchased new or used. If used, the age was under 5 years. Why HY Owners are Important What makes HY consumers so important is the fact they are pre-disposed to buying a vehicle regularly. They tend to be upper-middle income and in their middle to late forties. They constitute better than half of all new-car intenders and are open to switching brands. They also tend toward moving up in both brand and price. About 30 percent have leased a new vehicle at least once in the past 10 years. In effect, they are the cream of the crop and represent a willing new-car audience of buyers. Would Consider EV as Primary HH Vehicle IF had a comparable MSRP as 8.6% 14.9% 76.5% Would Consider EV as a Secondary HH Vehicle IF had comparable MSRP as 62.8% The Survey The study of HY owners is part of the 2015 Purchase Path Study (to be released in January-February) and was conducted throughout 2014 with a total sample in excess of 20,000 respondents just for this section of the survey. Reaction to Pricing One of the industry s beliefs is that electric vehicle pricing turns many consumers away from battery power. Significantly higher cost for an EV vs. a Distance between battery charging 50 miles 3.3% 8.2% 88.50% 75 miles 3.8% 9.1% 87.10% 100 miles 4.6% 11.1% 84.30% 150 miles 6.7% 16.9% 76.40% 200 miles 17.9% 28.2% 53.90% 300 miles 21.3% 47.3% 31.40% comparably sized gas or diesel powered car or truck is thought to be a primary reason for the lack of enthusiasm for EVs. The HY Study, however, shows only slightly higher interest (continued next page) Data from CNW Research Purchase Path Study. 13.8% 23.4% Current vehicle: Distance before fill up (gas or diesel) Primary Secondary 50 miles 1.6% 1.7% 75 miles 1.8% 2.3% 100 miles 2.2% 4.1% 150 miles 2.9% 4.6% 200 miles 19.4% 20.2% 300 miles 46.7% 45.6% Over 300 25.4% 21.5% 100.0% 100.0%

2 (continued from previous page) in electrics even if the MSRP were identical to a comparable gas or diesel powered car or light truck. Only 8.6 percent of HY said they would even consider an electric if the prices were the same. As a secondary vehicle in the household, the percentage is slightly higher at 13.8 percent. Why more interest as a secondary vehicle? We ll cover that in a second. What About Tax Credit? There is a slight interest increase if tax credits brought the price of an Electric down to a comparable level, but even at that, the share for a primary vehicle is barely 9 percent and just under 14 percent for a secondary vehicle. It s pretty clear that the interest in EV consideration is higher among HY than the actual market is showing, but we needed to look deeper into why these folks haven t actually made an electric purchase. Remember, this is simply consideration, not actually putting an electric on the shopping list. Daily Use Conventional Current Vehicle Here in lies the EVs rub. While many believe range concerns keep people away from electrics, there is another component in that equation: Hassle avoidance. So first we asked about the range they would like to see in an electric before actually putting an EV on the shopping list or improving the likelihood of consideration (among those who said they wouldn t consider an electric). As the table on the previous page shows, among the hard core respondents who said they would NOT consider an electric, the movement to maybe or yes requires at least a 200 mile range. Yet even at 300 mile range, nearly a third still say they wouldn t consider an electric. Current Vehicle Range on Gas/Diesel People are accustomed to patterns. They don t like to upset those patterns more than necessary and an electric has to be equivalent to what they are familiar with. For range, note on the previous page that the desire for an electric to be able to travel 200 to 300 miles on a single charge is parallel to what they are currently receiving from their vehicle 300 miles or more. Fuel Stops While EVs are supposed to be plugged in at night right there at home in the garage, a large percentage of these HY owners say that even that minimalist requirement is part of the hassle of owning an electric. Concerns also included power outages, using the vehicle again shortly after parking, high electricity bills, needing to use the garage for a car (rather than a workshop or storage area) and a host of other concerns, but they all boil down to being inconveniences. Isn t driving a gas-powered car also inconvenient? Yes and No, the HY owners say. The primary vehicle in the household has sufficient range to Would Consider EV as a Primary HH Vehicle IF tax credits made the purchase price the same as comparable 75.30% 9.1% 15.6% Would Consider EV as a Secondary HH Vehicle IF tax credits made the purchase price the same as comparable 13.9% 24.2% 61.90% Time between fill- ups (gas or diesel) Primary Secondary 1-3 days 3.4% 1.4% 4-7 days 13.6% 10.9% 8-14 days 32.9% 27.3% 15-21 days 36.1% 41.2% 22-28 days 9.3% 12.7% More than 28 4.7% 6.5% 100.0% 100.0% require fill-ups around one to two weeks apart. And about half say they usually make a snack purchase when at the gas station. So the gas stop is somewhat inconvenient, but not dramatically disliked. Among the fuel and go contingent, the average time spent in the gas station is less than 10 minutes. For the fuel-snack-go group, it s barely five minutes longer. CONTEXT: EVs have a long way to go to become a staple in the auto market. Among HY consumers, it has to be priced comparably to, travel as far, take far less time to re-charge. And that s only the beginning.

November TDR Hits 16.8 Million; Jitters Improves Even As Confidence Slips Jitters Index L: v Prev Mo R: v Yr Ago Sub- Prime Approval v Last Year 16.73% 3 There are some ups and downs in November s stats. - 2.11% Jitters Ease Even though CNW s measurement of consumer confidence in the overall U.S. economy has been slipping every 10-day period since the first week of September, people s home-centric concerns are easing. Contradictory? Not really. Consumers look at two distinctly different economic pictures: Their own and their neighbors. CNW Studies have shown an attitude exists that says I m doing okay, but from all I read and hear, the country s going to hell in a hand basket. New car purchases are made on Home-Centric considerations or Jitters. And for November, the attitude is that things are getting better for me and mine. Compared to a year ago, Jitters are down by more than 10 percent. Even compared to a month ago, the measurement shows a decline of more than two percent. (See Back Page for a breakout of the categories.) Dealership Data Positive Same-store sales at new-car dealerships are up around four percent vs. a year ago on the back of an near-19 percent increase in floor traffic. Closing ratios have declined indicating that the floor traffic is largely made up of people who are Same Store Sales - 10.7% 70.00% Share Retail 62.50% 55.00% 47.50% 40.00% 95 90 85 80 75 ConOidence in Overall U.S. Economy (1986 = 100) s1 s2 s3 o1 o2 o3 n1 n2 shopping and not yet ready to make an acquisition. Sub Prime Approvals Compared to last year, sub-prime approvals are well ahead of November 2013 data: up more than 16.7 percent. When compared to October, the data is virtually unchanged with a slight decline of less than 1 percent. Sub- Prime Approval v Last Month -0.87% New Floor Traffic 3.00% 18.7% Closing RaGo V Same Mo. Last Year - 7.65% 0.72% Closing Ra^o v Last Mo 4.15% 4.01% True Delivery Rate Based on the early sales reports accumulated by CNW, the full-month sales should come in at a 16.8 to 17- million True Delivery Rate (similar to SAAR) putting the full-year around 16.44 million units assuming December has a year comparable to 2013. - 1.39%

4 Anticipated Nov Actual Nov % Chng YTD YTD % Chng Document 106m cy14 cy13 14 v 13 cy14 cy13 14 v 13 Franchised Dealer Sales 1,225,980 1,203,170 1.9% 14,433,887 14,427,262 0.0% Independent Dealer Sales 1,142,816 1,139,360 0.3% 12,784,012 13,096,476-2.4% Casual (Private) Sales 738,096 755,386-2.3% 11,514,051 11,187,549 2.9% Total Sales 3,106,892 3,097,916 0.3% 38,731,950 38,711,287 0.1% Franchised Independent Franchised Franchised Independent Independent Document 107m Asking Price Asking Price Trans Price % of Asking Trans Price % of Asking Jan-14 $11,429 $9,942 $10,843 94.87% $9,513 95.68% Feb '14 $11,221 $9,694 $10,658 94.98% $9,291 95.84% Mar '14 $11,396 $9,847 $10,946 96.05% $9,490 96.37% Apr '14 $11,372 $9,811 $10,931 96.12% $9,469 96.51% May '14 $11,408 $9,967 $10,979 96.24% $9,621 96.53% June '14 $11,516 $10,482 $11,162 96.93% $10,109 96.44% July '14 $11,502 $10,336 $11,150 96.94% $9,949 96.26% Aug. 14 $11,229 $10,311 $10,883 96.92% $9,961 96.61% Sept '14 $11,309 $10,392 $10,963 96.94% $10,073 96.93% Oct. '14 $11,186 $10,242 $10,836 96.87% $9,836 96.04% Nov. '14 $11,194 $10,268 $10,849 96.92% $9,892 96.34% Nov. '13 $11,367 $10,205 $10,720 94.31% $9,625 94.32% Dec. 13 $11,419 $10,324 $10,855 95.06% $9,871 95.61% Mo. Vs Yr Ago -1.52% 0.62% 1.20% 2.77% 2.77% 2.14% This Mo v Last Mo 0.07% 0.25% 0.12% 0.05% 0.57% 0.31% November Used Sales Show Indie Improvement Used Days Supply Independent dealers have been taking it on the chin for the past few months, seeing volumes decline vs. 2013 on a regular basis, often in double digit declines. November, however, was a turnaround month for Indies with sales up slightly vs. a year ago and transaction prices bulking up. This month vs. a year ago, Independent actual transaction prices (excluding taxes, fees, addons) rose 2.8 percent. Casual Sales Take a Hit Casual sales, on the other hand, saw a rare year-over-year decline of 2.3 percent, cutting its full-year increase to less than 3 percent. Franchised Dealers Up New-car dealership used-car operations were on the positive side of sales and should see a near two percent increase for the full month to 1.226 million units. Prices also were up slightly vs. a year ago by 1.2 percent (again, excluding taxes, fees and add-ons). - 5.59% Overall Used Market For the entire industry, floor traffic continued to slide somewhat in the first two 10-day periods of Used Floor TrafOic November, but 101.88 continued to hover in 101.23 the 100 range (1986 = 100). The opening days of the third 10-100.26 100.42 100.13 99.89 99.72 day period, however, showed an 98.56 improvement. Days supply slipped around 5.6 percent on dealerinduced tighter inventory. s1 s2 s3 o1 o2 o3 n1 n2

Kontos Kommentary Summary As in September, a large proportion of higher priced, late- model manufacturer off- rental program vehicles, some of which were sold after delays due to recalls, biased average wholesale prices upward and masked the inherent softness of a wholesale used vehicle market facing high incoming supply. Retail used vehicle demand did not provide quite the support to auction prices it had in previous months, as franchised dealers did well simply to retail the many units they have been taking from off- lease purchases and in trade on strong new vehicle sales. Details According to ADESA Analytical Services monthly analysis of Wholesale Used Vehicle Prices by Vehicle Model Class 1, wholesale used vehicle prices in October averaged $9,678 - - up 1.3% compared to September and up 0.9% relative to October 2013. As in September, average prices for minivans were up significantly, but this reflects an increase in the percentage of current and one- year- old models sold in factory sales. Prices for used vehicles remarketed by manufacturers were down 11.3% month- over- month and 8.6% year- over- year, as manufacturers sold off elevated program vehicle inventories, including recalled units. Prices for fleet/lease consignors were down 3.7% sequentially and 2.2% annually. Prices for off- rental risk units Wholesale Used Vehicle Price Trends Average Prices ($/Unit) Latest Month Versus: Oct-14 Sep-14 Oct-13 Prior Month Prior Year Total All Vehicles $9,678 $9,554 $9,590 1.3% 0.9% Total Cars $8,466 $8,322 $8,455 1.7% 0.1% Compact Car $6,890 $6,681 $6,695 3.1% 2.9% Midsize Car $7,529 $7,634 $7,735-1.4% -2.7% Fullsize Car $7,762 $6,514 $7,049 19.1% 10.1% Luxury Car $11,610 $11,648 $11,597-0.3% 0.1% Sporty Car $12,322 $11,990 $12,102 2.8% 1.8% Total Trucks $10,554 $10,403 $9,963 1.4% 5.9% Mini Van $7,882 $7,079 $6,920 11.3% 13.9% Fullsize Van $10,704 $11,477 $9,969-6.7% 7.4% Mini SUV $12,462 $12,265 $11,380 1.6% 9.5% Midsize SUV $7,628 $7,427 $7,013 2.7% 8.8% Fullsize SUV $11,094 $10,506 $11,217 5.6% -1.1% Luxury SUV $17,917 $18,485 $18,781-3.1% -4.6% Compact Pickup $7,308 $7,255 $7,105 0.7% 2.9% Fullsize Pickup $12,826 $12,916 $11,927-0.7% 7.5% Total Crossovers $11,918 $11,936 $12,573-0.2% -5.2% Compact CUV $10,644 $10,499 $11,161 1.4% -4.6% Mid/Fullsize CUV $13,166 $13,284 $14,031-0.9% -6.2% Source: ADESA Analytical Services. September data revised. within this segment were again down significantly. Dealer consignors were the only seller group that saw average price increases in October, registering a 1.4% increase versus September and a 0.7% increase relative to October 2013. This bodes well for the wholesale market s ability to absorb excess dealer trades. Retail used vehicle sales in October were down 18.0% month- over- month and 3.8% year- over- year, based on data from CNW Research. However, franchised dealers saw a 2.2% year- over- year increase, indicating they are having success in retailing the many trade- ins they are taking in light of strong new vehicle sales. According to Autodata, sales of certified pre- owned (CPO) vehicles were up 7.5% versus September and 13.8% from the prior year. Strong CPO sales have been particularly useful in absorbing high incoming lease volumes. 1 The analysis is based on over six million annual sales transactions from over 150 of the largest U.S. wholesale auto auctions, including those of ADESA as well as other auction companies. ADESA Analytical Services segregates these transactions to study trends by vehicle model class. The views and analysis provided herein relate to the vehicle remarketing industry as a whole and may not relate directly to KAR Auction Services, Inc. The views and analysis are not the views of KAR Auction Services, its management or its subsidiaries; and their accuracy is not warranted. The statements contained in this report and statements that the company may make orally in connection with this report that are not historical facts are forward- looking statements. Words such as should, may, will, anticipates, expects, intends, plans, believes, seeks, estimates, bode, promises, likely to and similar expressions identify forward- looking statements. Forward- looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected, expressed or implied by the forward- looking statements. Factors that could cause or contribute to such differences include those matters disclosed in the company s Securities and Exchange Commission filings. The company does not undertake any obligation to update any forward- looking statements. 5

6 Back Page *Deliveries not sales Nov. 1-15 Nov. 1-15 % Chng Actual Sales Nov. '14 Full Mo New Cars cy2014 cy2013 14 v 13 Nov. '13 Sales Change Extension Detroit 3 93,528 91,488 2.2% 169,517 173,297 2.2% Asian 206,771 196,318 5.3% 347,989 366,518 5.3% European 53,819 51,476 4.6% 94,880 99,199 4.6% Ttl Pass. Cars 354,118 339,282 4.4% 612,386 639,013 4.3% New Trucks Detroit 3 229,958 219,553 4.7% 371,448 389,052 4.7% Asian 66,002 63,127 4.6% 217,952 227,878 4.6% European 7,979 7,153 11.5% 40,880 45,601 11.5% Ttl Lt. Trucks 303,939 289,833 4.9% 630,280 662,530 5.1% Ttl Industry 658,057 629,115 4.6% 1,242,666 1,301,544 4.7% Nov. 1-15 Full Nov. % Chng Prev Mo Prev Mo % Chng cy2014 cy2013 14 v 13 cy2014 cy2013 14 v 13 Lease Share 29.8% 29.1% 2.4% 29.6% 29.2% 1.4% Floor Traffic - New (105m) 105.77 89.1 18.7% 102.84 92.15 11.6% Floor Traffic - Used (105m) 100.02 93.2 7.3% 100.19 82.81 21.0% Nov. 1-15 Prev Yr % Chng v % Chng Pent Up Demand Units cy 14 cy2013 Same Mo '13 Prev Mo Nov. '14 119,500 Avg. New MSRP (101m) $38,786 $38,774 0.03% 0.27% Nov. '13 116,500 Total Discounts $6,155 $5,867 4.91% 0.02% % Change 2.6% Manufacturer Incentives $4,784 $4,457 7.34% -0.20% Dealer Incentives $1,371 $1,410-2.77% 0.79% Purchase Delay Core Trans Price $32,631 $32,907-0.84% 0.32% Nov. est. '14 3.06 % Mfg Incent of MSRP 12.33% 11.49% 7.3% Nov. '13 3.01 Months % Ttl Discnt of MSRP 15.87% 15.13% 4.9% % Change 1.7% Jitters Index Summary % Fed Gas Child's Job Day to Day Condition of Food Local Jitters Taxes Prices Edu* stability Needs**** Investments** Prices Taxes*** Index v Prev Mo 0.31% -7.84% -0.78% -1.85% -1.82% -6.72% 0.00% -0.41% -2.11% - v Mo. '13-3.21% 19.35% -4.85% -24.61% -10.90% -25.32% 0.00% -2.52% -10.70% True Delivery Rate Total U.S. Hispanic African- American Non- Hisp/AA Nov TDR 17.06 1.88 1.49 13.69 In Millions: Delivery Rate is similar to SAAR. Data shows the monthly deliveries projected to full- year deliveries