Beggs: ‘Normal’ Doesn’t Describe Close of 2012 Wholesale Market

Along with offering his thoughts on what this year might hold, Black Book’s Ricky Beggs didn’t use the term “normal” to describe the closing of 2012.

In his first online video analysis of 2013, Beggs told dealers that “throughout these party-filled holidays and a couple of slightly shortened work weeks, I must tell you that from our auction attendance at both physical and online auctions, the facts presented by the data we have recently received and the comments from the dealers we have talked with recently, the market would not be described as normal in relation to the December activity of the past few years."

In continuing his commentary contained in the latest episode of “Beggs on the Used Car Market,” the managing editor highlighted trends that’s been going for the past six weeks.

“The percentage of adjustments requiring raises to the most recent published values has been at levels we have only seen after the calendar has turned to the first quarter of a fresh year,” Beggs said. “The initial push of strength we believe was a result of additional vehicles needed to replace many of those damaged during Hurricane Sandy.

“The most recent strength has to be the overall pent-up demand bringing forward an early spring market,” he continued. “Consumers have put off buying their next new or used car as long as they can or at least want to. Their current car is old and consumers want to move forward now that the election issues are behind us with only the fiscal cliff still hanging over our heads.”

During the past six weeks, Black Book found the increases amounted from a low of 31 percent of the adjustments to a solid 50 percent this past week for a 39-percent average during this period.

Looking next at specific vehicle segments, editors found that the average truck segment price change produced a $5 gain, fueled by the strength of full-size vans. Among the units, passenger versions moved up $74 while cargo models jumped by $56.

While not to the vans’ level, Black Book discovered several other truck segments posted price climbs last week, including full-size pickups (up $5), compact pickups (up $3) and compact crossovers (up $3).

Meanwhile on the car-segment side, overall prices slid $37, the smallest average decline during the past five weeks and the second smallest decline since the week ending June 15.

Even with the national average gas prices at the pump at $3.26, only 1 cent above the low point of the last year, editors noticed the three smallest cars in physical size that offer the most fuel efficiency also boast the most stable values within the car segments. Black Book found entry level cars softened by just $1 while compact cars (down $5) and entry midsize cars (down $6) didn’t drop by much.

“The better equipped entry type cars are helping make these segments more enticing as consumers are not having to give up all the creature comforts with today’s smaller vehicles,” Beggs said.

Beggs wrapped up his latest analysis by looking ahead.

“If history is an indicator, the market should continue to show stability and maybe even a little strength,” he said. “The past four weeks during December with positive changes averaging 40 percent, almost one year ago during January 2012, the four-week positive changes averaged 48 percent.”

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Beggs Explains Why Average Units Are Triggering More Adjustments Than Clean Models

Instead of A Tale of Two Cities, Ricky Beggs and the Black Book team spotted “a tale of two markets,” when analyzing the current wholesale market, especially when it comes to the trends for average and clean vehicles.

In his most recent edition of “Beggs on the Used Car Market,” the Black Book managing editor acknowledged that when he gathered market activity and results for the last week it “was almost like two different markets.

“Many times when we say this, we are referencing the different trending between the cars and trucks or between small cars and big trucks,” Beggs explained. “But this past week the differences were noticed between the clean condition vehicles and the average condition units.”

Black Book discovered there were more average condition vehicles adjusted than clean within its daily adjustments. Specifically, editors modified 1,821 average units per day, compared to 1,454 clean units.

Editors also determined average condition unit adjustments resulted in more increases than clean models to the tune of 52 percent to 41 percent, respectively.

Furthermore, Black Book indicated the overall price change for clean condition vehicles was a decline of $31, while average models slipped by just $17.

“I see this trending where the extra clean car values have been so strong so an upward change was not necessary,” Beggs surmised.

“And along with the push of tax season buyers having to get additional inventory to meet the market demand the top of the line car was also in demand,” he added.

Overall, Black Book ended up with five of the 24 total vehicle segments increasing in price for the week. Another change in the trending patterns was with more car segments increasing than trucks.

Editors found entry level cars increased by $28, while compact cars increased by $7. Entry midsize cars climbed by $4.

They also mentioned trucks were positively led by midsize pickup trucks rising most at $39, with compact SUVs posting a solid $22 increase.

Changing gears, Beggs recapped how much he and other members of the Black Book team have been on the road recently.

“Over the past couple of weeks we have been around new and used car dealers at the NADA Convention and Expo in Las Vegas, and then a large group of motorcycle and powersports dealers at the Dealer Expo in Indianapolis,” Beggs shared.

“From within both industries it is very obvious about the enthusiasm toward the state of the market and how the dealers see the opportunities that are in front of them heading into the heart of 2012,” he continued.

“The dealers at both conventions were looking for the top tools to help them grow their business,” he added.

Beggs highlighted Black Book’s new Android app aimed to complement the previously released iPhone app that can provide most current and accurate motorcycle values.

“There were also many longtime auto market dealers at the Dealer Expo who were glad to now have a solid motorcycle app,” he interjected.

“Even though Scott Yarbrough and I were in Indy, the other Black Book editors were still covering the market for cars and the medium and heavy-duty trucks, as well as getting a close look at a couple of majorly updated 2013 new models that will soon be released for consumer purchase,” Beggs went on to say.

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Beggs: Wholesale Market Is ‘Busting Loose’

The new year already has generated a new record for Black Book’s editors as last week they established a new mark for the most daily adjustments.

Black Book’s staff made a daily average of 3,280 adjustments last week, almost 400 more per day than the previous high set during the week ending Aug. 12.

Thanks to the bevy of activity, managing editor Ricky Beggs acknowledged the conversation within Black Book’s office has changed significantly.

“The water cooler talk that has been often focused on college football for the past four to five months is now over until August or September, and once again, a team from the SEC has been crowned the champion,” Beggs began during his latest video blog, “Beggs on the Used Car Market," referring to college football's Southeastern Conference.

“The champion of the used-car market this week was the fact that 53-percent of the changes the editors made were increases,” he continued. “We haven’t had this level of positive changes since the week ending last May 20.”

While the amount of daily adjustments set a new precedent, Black Book discovered that last week’s overall movement settled at a decline of slightly less than $5.

For comparison, Beggs mentioned that when Black Book previously established its daily adjustments record last August, the overall movement was a decline of $119.

Beggs explained that last week’s overall dip “was definitely supported by the various dealer and auctioneer comments we heard such as ‘expecting an upturn’ and a more enthusiastic ‘on the verge of busting loose within the next two to three weeks.’”

“With slightly more 'average' condition values adjusted than 'clean,' and more of them being increases, this is a reflection of the interest and demand due to the tax season type cars and trucks,” Beggs continued.

Breaking it down by segment, Beggs noted: "For the first time in at least the past 12 weeks we not only have one car segment, but two that increased in price week over week."

Editors found that entry midsize cars ticked up by $1, while the entry level cars increased by $12.

Black Book noticed that three other car segments declined by $22 or less for the week: full-size cars (down $22), compact cars (down $15) and upper midsize cars (down $11).

Turning over to truck segments, Black Book determined that the overall change settled at a decline of $15, a level Beggs said was similar to the past three weeks.

Editors mentioned that compact pickups have increased five of the past six weeks and were also joined a week ago by full-size SUVs, which increased by $9.

Showing the overall stability of the trucks, Black Book indicated that there were six of the 14 segment types that declined by just $7 or less.

Beggs closed his commentary by elaborating how why the wholesale market appears to be heating up.

“As we gathered and analyzed all the market data this week, another sign of the increasingly active market was an increased level of data on quite a few more late model vehicles, those from model years 2010 through 2012,” Beggs shared.

“From this analysis we included market driven data values on an additional 68 vehicle listings. These were a mixture of highline cars, full-size trucks, entry midsize cars as well as compact and midsize crossovers,” he continued.

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