Vehicle Remarketing Industry Dynamics 6
Ownership changes during "the vehicle life cycle" are often expedited via the vehicle remarketing industry, which includes wholesale used vehicle and salvage auctions that are conducted in live and online venues. And 25 was no exception, as the quantity of vehicles in operation (VIO) and used vehicle transactions in the U.S. and Canada grew once again. Wholesale used vehicle auctions channeled net volumes approaching 1 million units into these used vehicle sales, while salvage auctions processed and sold approximately 3.25 million total-loss units. The Vehicle Life Cycle and Vehicle Remarketing in 25 -U.S. & Canada- Vehicles in Operation 258 Million Used Vehicle Transactions 46 Million REMARKETING New Vehicle Sales 19 Million Wholesale Auctions 1 Million Vehicles Removed from Operation 12 Million* *Includes approximately 3.25 million units of salvage auction sales. Figure 1. Source: ADESA Analytical Services. The rest of this section provides trends for each of the items depicted in the life cycle diagram. About one in five vehicles on the road will cycle in the used car market every year. 7
Total Vehicles in Operation Improving vehicle quality has allowed vehicles to last longer, thereby reducing vehicle retirements (but not total-loss units, which have actually increased). At the same time, new vehicle demand has remained strong, generating high additions to the stock of vehicles in operation. As a result, VIO has increased steadily in the U.S. and Canada over the last several years. U.S. (By Vehicle Age) 3, Through July 1 of Each Year (s) 25, 213,3 216,683 221,26 225,882 232,167 239,384 2, 15, 1, 5, 2 21 22 23 24 25-1 Years Old 2-3 Years Old 4-5 Years Old 6-7 Years Old 8-9 Years Old 1+ Years Old Figure 2. Source: R.L. Polk & Co. and ADESA Analytical Services. Canada (All Vehicle Ages) Through July 1 of Each Year (s) 19, 18,496 18,5 18,267 18,665 18,848 18, 17,5 17,571 17,783 17, 16,5 2 21 22 23 24 25E Figure 3. Source: R.L. Polk & Co. and ADESA Analytical Services. 8
New Light Vehicle Sales Remarkably, 17 million units has almost become a norm for U.S. auto industry sales, while Canada adds another 1.5-million-plus units a year. As soon as these vehicles are sold, they become used units eligible for future resale. (s of Units Sold) 2, 18,952 18,748 18,552 18,269 18,447 18,578 18, 1,549 1,571 1,74 1,594 1,534 1,583 16, 14, 12, 1, 8, 6, 4, 2, 17,42 17,178 16,848 16,676 16,913 16,995 2 21 22 23 24 25 REMARKETING U.S. Canada Figure 4. Source: Automotive News Data Center and ADESA Analytical Services. U.S. New Medium/Heavy Duty Truck Sales The strong economic conditions in 25 led to near-record medium and heavy truck sales to help handle surging truck shipments. Auctions are often involved in the remarketing of these vehicles as well. 6, 5, 461,872 431,653 496,575 4, 3, 35,9 322,284 328,389 2, 1, Class 8 Class 7 Class 6 Class 5 Class 4 TOTALS 2 21 22 23 24 25 211,57 122,614 51,29 29,125 47,417 461,872 139,616 91,564 42,43 24,362 52,37 35,9 146,31 69,328 45,95 24,3 37,827 322,284 141,964 66,789 51,4 28,98 39,616 328,389 23,197 75,9 7,2 36,259 47,87 431,653 252,792 88,858 6,154 46,278 48,493 496,575 Figure 5. Source: Ward s Communications and ADESA Analytical Services. 9
Total Vehicles Removed from Operation As vehicle quality and longevity has increased, the rate of vehicle retirement has slowed (although total-loss units, which have been involved in accidents, have actually increased). This has contributed to the growth of VIO. 16, (s) U.S. 14, 14,299 14,122 13,296 12, 12,85 11,93 11, 1, 8, 6, 4, 2, 2 21 22 23 24 25E Figure 6. Source: R.L. Polk & Co. and ADESA Analytical Services. (s) 1,45 Canada 1,4 1,386 1,396 1,365 1,4 1,35 1,3 1,25 1,232 1,248 1,2 1,15 1,1 2 21 22 23 24 25E Figure 7. Source: R.L. Polk & Co. and ADESA Analytical Services. 1
Used Vehicle Sales Retail used vehicle sales by franchised and independent dealers again broke 32 million units more than two-thirds of all used vehicles sold in the U.S. and Canada. However, private sales by individuals, which by pass the wholesale remarketing process, grew significantly in 25. Much of this growth can be traced to the recovery in vehicle ownership as leasing declined from 2-23. With the rebound in leasing since then, fewer individuals will take ownership of their vehicles and hence private sales should stabilize. 5, (s of Units Sold) U.S. 45, 4, 35, 3, 25, 2, 15, 41,62 11,883 13,559 42,624 43,25 43,572 42,76 12,263 13,478 13,668 12,2 14,416 13,78 13,732 14,751 44,138 13,478 14,21 REMARKETING 1, 5, 16,178 15,945 16,47 16,171 15,953 16,45 2 21 22 23 24 25 Franchised Dealers Independent Dealers Private Individuals Figure 8. Source: CNW Marketing /Research and ADESA Analytical Services. 2,5 2, 1,5 (s of Units Sold) 1,945 693 1,943 751 Canada 2,39 816 2,217 99 2,24 9 2,3 9 1, 333 324 326 421 45 5 5 919 868 897 887 89 9 2 21 22 23 24 25E Franchised Dealers Independent Dealers Private Individuals Figure 9. Source: DesRosiers Automotive Consultants and ADESA Analytical Services. 11
U.S. and Canada Auction Sales Volumes The growth in private sales discussed on the previous page was one reason auction volumes fell modestly despite the increase in total used vehicle sales. In addition, employee discounts on new vehicles generated attractive trade-ins at franchised dealerships, and these units were retailed directly rather than wholesaling them at auction especially when new vehicle inventories were depleted. Moreover, off-lease volumes continued to decline in 25, albeit at more modest rates than in 24. Considering these pressures, auction volumes remained remarkably steady. 12, (s of Units) 1, 9,28 9,45 9,526 485 51 495 9,96 528 9,666 9,46 495 485 8, 6, 4, 8,796 8,94 9,32 9,432 9,17 8,975 2, 2 21 22 23 24 25E U.S. Canada Figure 1. Source: National Auto Auction Association (NAAA) and ADESA Analytical Services. U.S. and Canada Auction Sales Volumes by Source 12, (s of Units) 1, 8, 9,28 9,45 9,526 267 (3%) 27 (2%) 324 (3%) 1,797 1,824 1,636 (17%) 9,96 238 (2%) 1,859 9,666 9,46 274 (3%) 284 (3%) 1,8 1,797 6, 3,398 (37%) 3,638 (38%) 3,872 (41%) 3,83 (38%) 3,117 (32%) 2,743 (29%) 4, 2, 3,762 (41%) 3,722 (39%) 3,811 (4%) 4,32 (4%) 4,475 (46%) 4,635 (49%) 2 21 22 23 24 25E Dealers Fleets and Leasing Co. Manufacturers Other Figure 11. Source: NAAA and ADESA Analytical Services. 12
REMARKETING Franchised and independent dealers obtain over 2 million vehicles as trade-ins. 13