Wholesale Market Insights December 2017 J o n a t h a n S m o k e & Zo R a h i m - C o x A u t o m o t i v e
T R A N S F O R M I N G T H E W A Y T H E W O R L D B U Y S, S E L L S & O W N S C A R S
Manheim Used Vehicle Value Index Concept: A single measure of used vehicle price change that is independent of underlying shifts in the characteristics of vehicles being sold Steps: All Manheim U.S. sales Classify by market segment Account for shifts in mileage Weight to provide unchanging mix Seasonally adjust 3
Manheim Used Vehicle Value Index Down From Record Levels December saw a 1.9% decrease from November and 5.6% increase from December 2016 135 130 132.0 125 120 115 110 105 100 January 1995 = 100 95 90 Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Jan-13 Jan-16 Source: Manheim, Cox Automotive 4
Wholesale Used Vehicle Prices vs. New Vehicle Prices Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 $13,500 Y/Y new prices now up 4% while wholesale up 6% and inflation up 2% $39,000 $13,000 $37,000 $12,500 $12,000 $11,500 $11,000 $10,500 $10,000 $35,000 $33,000 $31,000 $29,000 $27,000 $9,500 $25,000 Manheim Non-Adjusted Price (LHS) Average new vehicle transaction price per KBB (RHS) Source: Manheim, Kelley Blue Book, Cox Automotive 5
3-Year-Old Vehicles Saw Abnormal Depreciation Pattern in 2017 A reverse spring bounce followed by steady prices in summer and a fall correction 110.0% 3-Year-Old Model Index by Week 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 1 2 3 4 5 6 7 8 9 10111213141516171819202122232425262728293031323334353637383940414243444546474849505152 2014 2015 2016 2017 Source: Manheim Manheim Market Report (MMR) 3 Year Old Model Weekly Trend, Cox Automotive6
Retention Values Ended 2017 Flat With 2016 Retained Value as % of MSRP 65% 63% 61% 59% 57% 55% 53% 51% 49% 47% CY 2015 CY 2016 CY 2017 (1 to 3 year old models) 45% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Kelley Blue Book Auction Values as a % of MSRP and New Vehicle Sales Weighted 7
Percent Change in Wholesale Prices for Major Market Segments All segments except Midsize Cars saw year-over-year gains in December 40% 30% 1 year 2 years 3 years 4 years 20% 10% 5.6% 2.9% 5.3% 10.4% 5.8% 9.9% 0% -0.7% -10% -20% Industry Compact cars Midsize cars Luxury cars Pickups SUV/CUV Vans Source: Manheim, Cox Automotive 8
Shifting Consumer Preferences Not Reflected in Used Volumes Cars still dominate the wholesale market, while the SUV reigns supreme in new New Vehicle Sales by Category CAR PICKUP SUV VAN 60% Manheim Sales in December 50% 6% 40% 30% 42% 37% 33% 51% Car Pickup SUV Van 20% 10% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 16% 5% 11% Source: Motor Intelligence/Autodata, Manheim, Cox Automotive 9
Average Auction Price Rental Risk Units Average price for rental risk units sold in December up 0.3% y/y and down 2% m/m $17,500 $17,000 $16,500 2014 2015 2016 2017 $16,000 $15,500 $15,000 $14,500 $14,000 $13,500 (mix and mileage adjusted) 1 2 3 4 5 6 7 8 9 10 11 12 Source: Manheim, Cox Automotive 10
Average Mileage Rental Risk Units Sold at Auction Average mileage for rental risk units sold in December was 15% above a year ago 60,000 55,000 50,000 49,753 45,000 40,000 35,000 30,000 25,000 20,000 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Source: Manheim, Cox Automotive 11
Distribution of Rental Risk Vehicles 2015 Q4 2016 Q4 2017 Q4 Number of unique year, make, model, body configurations sold 4,178 3,026 3,014 Share accounted for top 10 YMMB 14.2% 14.0% 11.9% Share accounted for top 25 YMMB 24.8% 24.8% 22.5% Number of YMMB to reach 50% share 96 97 110 Source: Manheim, Cox Automotive 12
Rental Risk Units Sold by Condition 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 0-1.9 2.0-2.9 3.0-3.9 4.0-4.9 5 Source: Manheim, Cox Automotive 13
Rental Risk Units Sold by Make 100% 90% 80% 70% 60% 50% 40% 30% 20% All other Mazda Kia Jeep VW Chrysler Hyundai Dodge Toyota Nissan Ford Chevrolet 10% 0% 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 Source: Manheim, Cox Automotive 14
Manheim Market Report (MMR) Vehicle Insights The top selling cars in December at Manheim showed varying but average to slightly below average levels of depreciation in the last 30 days (Dec 2- Jan 2) while depreciation over the last 12 months has been normal to below normal Rank Source(Rank) Category Subcategory Vehicle 2-Jan Past 30 Days Last Year Current Dep L12M Dep/Mo 1 All Midsize Car Midsize Car Premium 2015 NISSAN ALTIMA 4C 4D SEDAN S $9,725 $9,825 $11,000-1.0% -1.0% 2 All Midsize Car Midsize Car Premium 2013 VOLKSWAGEN PASSAT 5C 4D SEDAN SE $9,300 $9,375 $9,150-0.8% 0.1% 3 All Luxury Luxury Car Premium 2015 MERCEDES-BENZ C CLASS 4D SEDAN C300 4MATIC $22,300 $22,400 $27,300-0.4% -1.5% 4 All Compact Car Compact Car Premium 2017 TOYOTA COROLLA 4D SEDAN LE $12,350 $12,500 $14,900-1.2% -1.4% 5 All Midsize Car Midsize Car Premium 2015 NISSAN ALTIMA 4C 4D SEDAN 2.5 SV $11,050 $11,150 $12,700-0.9% -1.1% 1 Dealer Dealer Luxury Luxury Car Premium 2015 MERCEDES-BENZ C CLASS 4D SEDAN C300 4MATIC $22,300 $22,400 $27,300-0.4% -1.5% 1 Lease Lease Midsize Car Midsize Car Premium 2015 NISSAN ALTIMA 4C 4D SEDAN S $9,725 $9,825 $11,000-1.0% -1.0% 1 Rental Rental Midsize Car Midsize Car Premium 2016 NISSAN ALTIMA 4C 4D SEDAN S $10,550 $10,650 $13,200-0.9% -1.7% Source: Manheim, Cox Automotive 15
Growth of Off-Lease Is Decelerating 4,500,000 Estimated Off-Lease Maturities 4,000,000 4,002,641 3,500,000 3,000,000 3,084,680 3,594,147 3,886,538 2,500,000 2,517,361 2,000,000 1,500,000 1,000,000 500,000 0 2015 2016 2017 2018 2019* Source: Cox Automotive; 2019 maturities are not complete due to 2-year leases yet to be recorded in 2017 16
The Composition Gets Richer 60.0% SHARE OF LEASE MATURITIES CAR CUV SUV PICKUP VAN 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 2016 2017 2018 2019 2020 Source: Cox Automotive 17
The Top Growing Vehicles Are Trucks and SUVs Source: Cox Automotive 18
Jonathan Smoke & Zo Rahim Economic Industry Insights jonathan.smoke@coxautoinc.com zohaib.rahim@coxautoinc.com 19