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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Kia Recalls Certain Optima & Rondo Models

While brand officials highlighted their upcoming Super Bowl commercial, the National Highway Traffic Administration revealed a recall Kia Motors America is orchestrating.

NHTSA indicated Kia is recalling the Optima from the 2006 through 2008 model years and the Rondo from the 2007 and 2008 model years for a problem associated with the front air bags.

Federal officials indicated a total of 145,755 vehicles contain a clock spring contact assembly for the driver’s air bag supplemental restraint system that may become damaged through usage over time.

NHTSA fears if the clock spring assembly becomes damaged, the driver’s air bag electrical circuit will experience a high resistance condition potentially causing the driver’s air bag to not deploy.

If the clock spring develops high resistance, officials indicated that in the event of a crash the driver’s air bag will not deploy and will not be able to properly protect the driver, increasing the risk of injuries.

Kia told NHTSA it will begin to notify owners and commence a repair campaign at franchised dealers beginning in March. Dealer service departments have been told to replace the vehicle’s air bag clock spring assembly as necessary for free.

Brand officials noted the Optimas originally were manufactured between Sept. 25, 2005 and Jan. 29, 2009. The Rondos were made between Sept. 13, 2006 and March 21, 2008.

Potentially effected owners also can contact Kia at (800) 333-4542.

Kia Discusses Super Bowl Commercial

In other brand news, Kia believes it is tapping into the idea of dreams revealing true desires in a new 60-second commercial set to air during the fourth quarter of Super Bowl XLVI. 

In the spot, titled “Drive the Dream,” officials highlighted the new 2012 Optima Limited races through a Gen X couple’s wildest thoughts as they sleep, including Victoria's Secret Angel Adriana Lima waving the checkered flag at a speedway, an in-your-face Motley Crue concert, mixed martial arts legend Chuck Liddell battling in the ring, a heroine and hunk on horseback in a romance novel setting champion bull rider Judd Leffew taming a bucking rhinoceros and a fairy tale ending.

Kia is returning to the big game for the third straight year with a fully integrated marketing campaign incorporating TV, cinema, digital, print, social media and in-dealership components.

In a Super Bowl advertising first, Kia pointed out the complete “Drive the Dream” ad will premiere on Feb. 2 on more than 18,000 movie screens nationwide in National CineMedia’s FirstLook pre-show program before airing in the game.

Kia said it also will run 15-second teaser ads featuring Adriana Lima on TV and in cinema beginning today while also leveraging the Twitter and Facebook channels of the spot’s celebrity cast.

A special expanded version of the ad will be available at YouTube.com/Kia beginning on Feb. 2.

Furthermore as part of the “Drive the Dream” campaign, consumers can download a $25 pre-paid test drive voucher at Kia.com beginning on Feb. 2 that is redeemable after eligible consumers visit a Kia dealership and complete a test drive of any Optima model.

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CNW: Days’ Supply of Used Models Softening Even Further

CNW Research’s latest used-vehicle supply findings concur with several other assertions from wholesale analysts — it’s not going to be easy for managers to keep their used inventories stocked.

Even with trade-ins climbing because of greater new-vehicle sales, CNW revealed on Tuesday that the industry remains at a 45-days’ supply of used vehicles.

Highlighting just how significant the supply dearth is, president Art Spinella noted that January is running at a 44.3 days’ supply, lower than any month of 2011. For comparison, the level stood at 50.7 days in January of last year.

CNW recollected that having a 70 to 80 days’ supply in the early 2000s was not uncommon. In fact, used supply hit 86 days’ in November of ’08.

“Dealers continue to struggle finding the right vehicles for their inventory,” Spinella acknowledged.

“It was once thought that having a 45 days’ supply was ‘ideal,’ but that figure is now considered far too low for most dealerships. The likely ideal level is in the low 50 days,” he explained.

CNW determined that small-car supply — just like on the new-vehicle side — continued to shrink as a share of total sales while full-size pickup inventories rose to its highest level of the year in December.

“Estimated sales for January shows small cars again declining to about 16 percent of sales while pickups should take more than 13 percent,” Spinella projected.

Early January Sales Trends

Looking at how used sales are shaping so far this month, CNW indicated that private-party sales continue to increase as a share of total sales, running more than 26 percent ahead of January of last year.

Spinella pointed out that franchised dealer used sales are up about 4 percent in the opening half of the month while independent dealers saw a near 3-percent decline.

As demand increases, CNW said dealers are beginning to see prices firming.

“For example, franchised dealers' average used-car asking price in January is about $11,516, and they are getting more than 94 percent of that asking price for vehicles bringing average transaction price to $10,855, up 2.9 percent versus year ago,” Spinella highlighted.

“It also is a gain of nearly 3 percent versus December 2011,” he added.

“If the rest of this month reflects historic first-half of January trends, the industry will sell in the 2.17 million unit neighborhood this month, or 8.2 percent ahead of last year’s 2.01 million,” Spinella went on to estimate.

In terms of age, CNW noted the hot products are still the one- to six-year-old rides, but the supply is tight.

Older models — more than 10 years old — are lagging somewhat based on CNW’s monthly segment tracking surveys.

“There is a return of younger consumers to the used-car market which should perk up the over-10 year old sales numbers in the coming months,” Spinella surmised.

“Pickups are gaining in market share while small cars are diminishing,” he continued. “This could change if gasoline prices rise dramatically, but for many of the 20-somethings, a move to anything newer than what they currently drive will improve fuel economy and offset all but massive fuel price increases.

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