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Used Car Dealers 2016

A Record Run Continues

• New light-vehicle sales may receive most of the headlines, but the used-car market enjoyed an equally great 2015 with a 5.6% increase, or 38.3 million vehicles sold.

• The average used-vehicle price of $18,600 was a 4.6% increase and a new record. With an increasing number of returned leased vehicles, the average age of a sold used car during 2015 decreased to 4.4 years. Plus, 54% were 3 years old or newer.

• Primarily because of lower gas prices, the average transaction price of a pickup truck increased 9.9% and a non-luxury SUV/CUV 5.6%, compared to just a 0.1% increase for non-luxury cars.

Wholesale Used Vehicles Price Trends, 2015–2016

|Time Period |All Vehicles |All Cars |All Trucks |

|Average price: Feb. 2015 |$10,167 |$9,074 |$11,409 |

|Average price: Jan. 2016 |$10,254 |$8,535 |$12,093 |

|Average price: Feb. 2016 |$10,202 |$8,506 |$12,030 |

|Feb. 2016 vs. Jan. 2016 |-0.5% |-0.3% |-0.5% |

|Feb. 2016 vs. Feb. 2015 |+0.3% |-6.3% |+5.4% |

ADESA Analytical Services, March 2016

Independents’ Missed Opportunities

• There are 40,000 independent used car dealerships and 18,000 franchise dealerships, but independents have difficulty remaining competitive. In a recent survey, 52% stated that “inventory acquisition” and “capital to finance inventory” were their top challenges.

• During 2015, independents sold 12% more vehicles 6 years or older, but also sold 12% fewer vehicles 5 years or newer. Franchise dealers obtained a much larger share of newer used vehicles because of their exclusive access to closed auctions.

• Independents that invested in customer relationship marketing (CRM) software increased the average vehicle profit $261, sold an average of 14 more vehicles per month and reduced the average car turn from the 60-day industry average to 19 days.

Average Mileage for Auction Used Vehicles*, 2000–2015

|Year |Mileage |

|2000 |84,500 |

|2005 |89,500 |

|2010 |102,500 |

|2011 |112,000 |

|2012 |118,500 |

|2013 |120,000 |

|2014 |121,500 |

|2015 |121,000 |

Manheim, 2016 *auction price between $4,000 and $6,000

Inside the Certified Pre-Owned Sector

• Certified Pre-Owned (CPO) vehicles continue to be a growing sector in the used car market, increasing 55.7% since 2010, with a total of 2,553,111 sold during 2015, a 9.1% increase over 2014.

• CPO vehicle sales at franchise dealerships reached 22.4% during 2015. For the period 2016–2018, approximately 5.5 million leased vehicles will be returned, which will increase their share of franchised dealers’ used vehicle sales to 25%.

• According to research, CPO shoppers spend a bit more than 9 minutes researching online, compared to 4.25 minutes for new car shoppers and 4 minutes for used car shoppers.

CPO Demographic Data, 2015

|Demographic Metric |CPO |New Only |Used Only |

|Men |62% |69% |73% |

|Women |38% |31% |27% |

|Adults, 18–34 |29% |29% |42% |

|Adults, 35+ |71% |71% |58% |

|Shopped online via desktop |77% |59% |48% |

|Shopped online via smartphone |13% |29% |42% |

|Shopped online via tablet |10% |13% |9% |

, 2015 Used Vehicle Market Report, 2016

Faster Buying Process Moves the Needle

• According to the 2015 Cox Automotive Time Study, the average time for the sales process, including price negotiation, was 53 minutes; an appraisal was 43 minutes; and the F&I (finance and insurance) session was 61 minutes.

• At a total of 157 minutes, the entire car buying process was 1.75 times longer than what an Autotrader study found to be optimum. Customer satisfaction starts to erode significantly after 90 minutes and declines to less than average satisfaction at 2.5 hours.

• The Online Retail Finance & Insurance Study from MakeMyDeal found that 84% of consumers think F&I products have real value, but 71% would prefer to research F&I at home. When they do, 63% said they are more likely to purchase F&I products.

Buyers’ Satisfaction with Purchase Process, March–May 2015

|Buyer Perception |All Buyers |New |Used |

|Overall experience at dealership |76% |79% |74% |

|The test-drive process |81% |82% |80% |

|Sales staff interactions |77% |81% |75% |

|Financing department interactions |67% |69% |65% |

|Entire buying process time |56% |56% |57% |

Autotrader/Kelley Blue Book, 2016 Car Buyer Journey, 2016

Consumer Insights

• The Autotrader/Kelley Blue Book study also revealed that used car buyers spent more time, 15 hours and 22 minutes, to acquire a vehicle than new car buyers, at 13 hours and 1 minute, and with 60% of used buyers’ time for online research and shopping.

• Of all used car buyers participating in the study, 29% knew the exact vehicle they wanted to buy, compared to 34% for new car buyers.

• Used car buyers are more likely to shop third-party Websites, at 80%, compared to 57% at dealership Websites and 29% at OEM Websites.

Method of Initial Contact with Dealership, March–May 2015

|Contact Method |All Buyers |New |Used |

|Walk-in |56% |61% |54% |

|Phone |25% |20% |28% |

|Email |14% |15% |13% |

|Live online chat service |3% |3% |3% |

|Text |1% |1% |1% |

|Social media |1% |0% |1% |

Autotrader/Kelley Blue Book, 2016 Car Buyer Journey, 2016

Future Facts

• According to a May 2015 study by Ipsos for CarMax, 49% of surveyed adults said they would purchase a used car if safety technology upgrades, such as collision avoidance, were offered at a reasonable price.

• In the same survey, 23% said that their “greatest wish” for a future used car would be one that is self-cleaning, 21% would wish for one that helped to keep them calm and focused and 11% that complements their driving.

• RVI Group’s analysis of the used car market in its December 2015 Risk Outlook report concluded that used vehicle prices will decline every year during the period 2016–2020: 2016, -0.9%; 2017, -3.2%; 2018, -4.9%; 2019, -6.7%; and 2020, -7.9%.

Used Vehicle Price Index by Segment, 2016 and 2017

|Segment |2016 |2017 |Segment |2016 |2017 |

|Sub-compact |-0.3% |+1.2% |Luxury full-size sedan |+2.8% |-3.4% |

|Compact |-1.4% |-1.2% |Small pickup |+4.2% |-0.8% |

|Small sedan |+0.8% |-1.7% |Full-size pickup |+0.7% |-3.5% |

|Mid-size sedan |+0.8% |-2.3% |Minivan |+3.6% |-1.9% |

|Full-size sedan |+2.8% |-2.7% |Full-size van |0.0% |-3.6% |

|Sporty coupe |+2.2% |-2.6% |Small SUV |-0.9% |-2.7% |

|Sports car |-0.8% |-3.8% |Mid-size SUV |+0.5% |-2.4% |

|Luxury coupe |+4.3% |-5.6% |Luxury SUV |0.0% |-1.8% |

|Luxury small sedan |+1.6% |-2.3% |Luxury SUV |0.0% |-1.8% |

|Luxury mid-size sedan |+0.1% |-3.7% |

|Men |68.4% |59.9% |

|Women |31.6% |40.1% |

|Adults, 18–49 |63.4% |75.3% |

|Adults, 50+ |36.6% |24.7% |

|European Americans |80.9% |33.3% |

|African Americans | ................
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