Company Jonathan Smoke Remarketing Big Picture 2017 and Beyond
Economic Expansion Continues 10.00 REAL GROSS DOMESTIC PRODUCT (SAAR) % GROWTH BY QUARTER 8.00 6.00 4.00 3.1 2.00 0.00-2.00-4.00-6.00-8.00-10.00 Source: United States Bureau of Economic Analysis
Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 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 Consumer Confidence Strong Consumer Confidence Index (Index 1985=100, SA) Plans to Buy Auto in 6 Months (% SA) 140.00 16.00 120.00 100.00 80.00 60.00 40.00 20.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 0.00 Source: The Conference Board; Moody s Analytics
% Lending Robust and Healthy Consumer Credit Defaults Auto Loan First Mortgage Bankcard 10 9 8 7 6 5 4 3 2 1 0 4/30/04 4/30/05 4/30/06 4/30/07 4/30/08 4/30/09 4/30/10 4/30/11 4/30/12 4/30/13 4/30/14 4/30/15 4/30/16 4/30/17 Source: S&P Experian Credit Default Indices; Bloomberg
1/30/04 4/30/04 7/31/04 10/31/04 1/31/05 4/30/05 7/31/05 10/31/05 1/31/06 4/30/06 7/31/06 10/31/06 1/31/07 4/30/07 7/31/07 10/31/07 1/31/08 4/30/08 7/31/08 10/31/08 1/31/09 4/30/09 7/31/09 10/31/09 1/31/10 4/30/10 7/31/10 10/31/10 1/31/11 4/30/11 7/31/11 10/31/11 1/31/12 4/30/12 7/31/12 10/31/12 1/31/13 4/30/13 7/31/13 10/31/13 1/31/14 4/30/14 7/31/14 10/31/14 1/31/15 4/30/15 7/31/15 10/31/15 1/31/16 4/30/16 7/31/16 10/31/16 1/31/17 4/30/17 7/31/17 % Interest Rates Have Been Favorable New Auto Loan Rates 60 Month 48 Month 8 7 6 5 4 3 2 1 0 Source: Bankrate.com; Bloomberg
Cost Advantage of Leasing Down Source: Dealertrack; Cox Automotive
2012_01 2012_03 2012_05 2012_07 2012_09 2012_11 2013_01 2013_03 2013_05 2013_07 2013_09 2013_11 2014_01 2014_03 2014_05 2014_07 2014_09 2014_11 2015_01 2015_03 2015_05 2015_07 2015_09 2015_11 2016_01 2016_03 2016_05 2016_07 2016_09 2016_11 2017_01 2017_03 2017_05 Yet Leasing Remains Resilient 35.0% 32.4% 30.0% 25.0% 28.8% 20.0% 15.0% 10.0% 5.0% 0.0% Source: Polk Insight
1980 1980 1981 1982 1983 1983 1984 1985 1986 1986 1987 1988 1989 1989 1990 1991 1992 1992 1993 1994 1995 1995 1996 1997 1998 1998 1999 2000 2001 2001 2002 2003 2004 2004 2005 2006 2007 2007 2008 2009 2010 2010 2011 2012 2013 2013 2014 2015 2016 2016 2017 Quarterly New Lt. Vehicle SAAR (Millions) Post Peak New Vehicle Part of Cycle 20.00 1.00 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 0.00 Source: BEA; Recessions (shaded) defined by NBER's Business Cycle Dating Committee
Shifting Preferences Play a Role New Vehicle Sales by Category Manheim Sales in September CAR PICKUP SUV VAN 60% 50% 6% 40% 30% 41% 38% 31% 53% Car Pickup SUV Van 20% 16% 11% 10% 5% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Motor Intelligence/Autodata, Manheim, Cox Automotive
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Car Parc Also Impacts the Market 20,000,000 18,000,000 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 Light Vehicles in Operation, July 2017 600,000 500,000 400,000 300,000 200,000 100,000 0 ANNUALIZED RETAIL USED VEHICLE SALES BY AGE OF VEHICLE 0 to 4 YO 5 to 8 YO 9 to 12 YO 13+ YO Source: IHS Markit, Cox Automotive
Dealer Issues 1 Market Conditions 37% 2 Limited Inventory 34% 3 Competition 31% 4 Credit Availability for Consumers 26% 5 Expenses 23% 6 Consumer Confidence 15% 7 Credit Availability for Business 9% 7 Regulations 9% 7 Staff Turnover 9% 10 Consumer Transparency in Pricing 8% 11 Too Much Retail Inventory 7% 12 Interest Rates 5% Source: Top Factors Holding Back Business, Cox Automotive Q3 2017 Dealer Sentiment Index
Off-Lease Tsunami Weakens 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
Manheim Used Vehicle Value Index At Record Levels 135 134.9 130 125 120 115 110 105 100 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 14
Manheim vs. New Vehicles 60% 55% 50% 45% 40% 35% 30% Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Source: Bureau of Labor Statistics, Manheim, Cox Automotive 15
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 Underlying Average Price Trends $13,500 $36,000 $13,000 $12,500 $12,000 $11,500 $11,000 $10,500 $10,000 $35,000 $34,000 $33,000 $32,000 $31,000 $30,000 $29,000 $28,000 $9,500 $27,000 Manheim Index $ Amount (LHS) Manheim Non-Adjusted Price (LHS) Average new vehicle transaction price per KBB (RHS) Source: Manheim, Kelley Blue Book, Cox Automotive 16
Retained Value as % of MSRP Prices Are Higher and Retention Values Are Now Up Y/Y 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 17
Percent Change in Wholesale Prices 40% 35% 30% 1 year 2 years 3 years 4 years 25% 20% 15% 10% 5% 6.3% 4.4% 2.3% 6.4% 9.1% 6.0% 8.9% 0% -5% -10% Industry Compact cars Midsize cars Luxury cars Pickups SUV/CUV Vans Source: Manheim, Cox Automotive 18
Manheim Market Report (MMR) Vehicle Insights The top selling cars in September at Manheim showed appreciation in September (Sep 1- October 1) and lower than normal depreciation in last year based on their MMRs Rank Source(Rank) Category Subcategory Vehicle 1-Oct Past 30 Days Last Year Current Dep L12M Dep/Mo 1 All Van Compact Van 2017 KIA SEDONA 4D WAGON LX $19,300 $19,300 $20,000 0.0% -0.3% 2 All Midsize Car Midsize Car Premium 2015 NISSAN ALTIMA 4C 4D SEDAN S $11,050 $11,000 $11,100 0.5% 0.0% 3 All Luxury Luxury Car Premium 2015 MERCEDES-BENZ C CLASS 4D SEDAN C300 4MATIC $23,500 $24,400 $29,300-3.7% -1.6% 4 All Compact Car Compact Car Premium 2016 FORD FUSION FWD 4D SEDAN SE $13,250 $13,150 $13,050 0.8% 0.1% 5 All Midsize Car Midsize Car Premium 2014 NISSAN ALTIMA 4C 4D SEDAN S $9,825 $9,750 $10,250 0.8% -0.3% 1 Dealer Dealer Luxury Luxury Car Entry 2007 LEXUS ES 350 4D SEDAN $5,700 $5,850 $7,400-2.6% -1.9% 1 Lease Lease Midsize Car Midsize Car Premium 2015 NISSAN ALTIMA 4C 4D SEDAN S $11,050 $11,000 $11,100 0.5% 0.0% 1 Rental Rental Midsize Car Midsize Car Premium 2016 NISSAN ALTIMA 4C 4D SEDAN S $12,400 $12,300 $13,800 0.8% -0.8% Source: Manheim, Cox Automotive 19
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 Rental Unit Pricing Follows the Market $13,500 $13,000 $12,500 $12,000 Manheim Index vs xrental Mainheim Index Manheim Index NSA xrental NSA 6.00% 5.00% 4.00% 3.00% 2.00% Month/Month Price Change, Manheim Index vs xrental Manheim Index Manheim Index NSA m/m xrental NSA m/m $11,500 $11,000 $10,500 1.00% 0.00% -1.00% -2.00% -3.00% Source: Manheim, Cox Automotive 20
Average Auction Price Rental Units $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 21
Average Mileage Rental Risk Units 60,000 Sold at Auction 55,000 50,000 45,000 42,255 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 22
Distribution of Rental Risk Vehicles Number of unique year, make, model, body configurations sold 2015 Q3 2016 Q3 2017 Q3 3,048 2,572 2,404 Share accounted for top 10 YMMB 15.6% 15.7% 11.8% Share accounted for top 25 YMMB 26.9% 27.1% 21.2% Number of YMMB to reach 50% share 85 97 117 Source: Cox Automotive
50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Rental Risk Units Sold Distribution by Condition 2Q 2016 2Q 2017 0-1.9 2.0-2.9 3.0-3.9 4.0-4.9 5.0 Source: Cox Automotive
50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Rental Risk Units Sold Distribution by Condition 3Q 2016 3Q 2017 0-1.9 2.0-2.9 3.0-3.9 4.0-4.9 5.0 Source: Cox Automotive
U.S. Car Rental Market Revenue In Billions $30 Total Revenue (Billions) Revenue per Car $14,000 $25 $12,000 $20 $10,000 $8,000 $15 $6,000 $10 $4,000 $5 $2,000 $0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 $0 Source: Auto Rental News
Millions New Sales into Rental & Share of Total Sales 2.3 2.1 1.9 1.7 1.5 1.3 1.1 0.9 0.7 0.5 New sales into rental Share of total new vehicle sales 15% 14% 13% 12% 11% 10% 9% 8% 7% 6% 5% Source: BEA, Bobit
100% Distribution of New Vehicle Sales into Rental by Manufacturer 90% 80% 70% 60% 50% 40% 30% 20% 10% % Change in Sept YTD sales Mazda (-38%) Subaru (+68%) Kia (-7%) Hyundai (-39%) Toyota (-10%) GM (-12%) Ford (-9%) Nissan (+8%) FCA (-27%) 0% 2015 2016 2017 YTD Source: Bobit
Millions Total Wholesale Supply: Off-Rental 2.3 2.1 1.9 1.7 1.5 1.3 1.1 0.9 0.7 0.5 Source: Bobit, Cox Automotive Analysis
Off-Rental Return Rate (not sold directly to dealers or consumers) Millions 1.2 Units Percent 50% 1.0 48% 0.8 46% 0.6 0.4 44% 0.2 42% 0.0 2013 2014 2015 2016 2017F 2018F 2019F 2020F 40% Source: Cox Automotive Analysis
Summary of Hurricane Damage and Expected Impact At least 600,000 vehicles severely damaged or scrapped Subtracted approximately.3-.4 from August SAAR, which came in at 16.0 400,000 vehicles should be replaced over September, October, and November 30-40% of replacements will be new vehicle sales; rest will be used Boost to new and used vehicle sales through November Surge in rental demand impacting expansion in rental fleet Tighter wholesale supply expected to last 2-3 months Wholesale used vehicle values expected to increase for 2-3 months 31
Millions Sales Outlook Vehicle Sales by Year and Type, Actual and Forecast New - Total Used 60.0 50.0 40.0 30.0 37.6 35.8 36.7 38.0 38.5 39.1 39.3 39.5 20.0 10.0 14.4 15.6 16.5 17.3 17.5 17.1 16.6 16.1 0.0 2012 2013 2014 2015 2016 2017F 2018F 2019F Source: Cox Automotive
Company Thank you! Jonathan Smoke jonathan.smoke@coxautoinc.com
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