January 6, 2020

January 6, 2020

"The depreciation rate normalized in the first week of the new year after several weeks of steep declines in Q4 of 2019."

Anil Goyal, Executive Vice President, Operations

WEEKLY CHANGE

0% -0.2% -0.4% -0.6% -0.8%

-$19 -0.37%

-$1 -0.02%

-$13 -0.17%

-$16 -0.15%

-$78 -0.56%

-$47 -0.28%

-$187 -0.63%

-$47 -0.33%

-$116 -0.33%

-$26 CARS -0.26%

WEEKLY CHANGE

0%

-0.2% -0.4% -0.6% -0.8% -1.0%

-$17 -0.17%

-$33 -0.30%

-$55 -0.40%

-$53 -0.25%

-$107 -0.72%

-$67 -0.38%

-$131 -0.66%

-$204 -0.65%

-$79 -0.70%

-$34 -0.42%

-$71 -0.51%

-$98 -0.65%

-$66

TRUCKS -$81 -0.44% -0.43%

Model Years: 2011-2017, Volume Weighted Wholesale Average Values, Weekly Change from 12/27/19 to 1/3/20

Normal Depreciation Trend

? Volume-weighted, overall car segment values decreased by 0.26% last week. In comparison, market values decreased an average of 0.78% over the recent 4-week period.

? In cars, Near Luxury Car and Prestige Luxury Car segments values decreased the most. ? Volume-weighted, overall truck segment (including pickups, SUVs, and vans) values

decreased by 0.44% last week. In comparison, market values decreased an average of 0.76% over the recent 4-week period. ? In trucks, mainstream crossover/SUV segments decreased the least.

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January 6, 2020

Sentiment from the Industry

Key comments from auction lanes and industry observers:

"Sales percentage seemed low. There were very few people bidding in the lanes and online." Mark in MI

"Mid-size cars sold well but SUVs had a tough time getting bids." Andrew from NJ

Three-Year Retention: High Volume Segments

2017 MY Wholesale Values in Jan 2020 as Percent of Typically-Equipped MSRP

Full-Size Pickup Mid-Size Crossover/SUV Compact Crossover/SUV

Compact Car Mid-Size Car

Luxury Car

59.3% 51.6% 49.7% 46.6% 44.0% 42.0%

source: Black Book Visual Analytics

Despite the values of Full-Size Pickups declining at a faster pace this year, the retention values of threeyear old pickups are high in comparison to other segments. Luxury Cars have continued to decline in retention.

Vehicle Highlight

2020 INFINITI Q50 is equipped with a 3.0-liter V6 twin-turbocharged engine producing 300 hp and 295 lbft of torque, powered by a 7-speed automatic, and offered in RWD and AWD configurations. Standard

features for the Q50 include forward-collision warning and automatic emergency braking, a 3.0-liter turbocharged V6 for all trims and improved two-screen infotainment system. MSRP with destination starts at $37,425 and the key competitors include the Audi A4, BMW 3-Series, Lexus IS and Mercedes-Benz C-Class.

This week's report includes our Monthly Edition Supplement on Specialty Markets.

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SPECIALTY MARKETS: Collectible Cars

January 6, 2020

The Collectible Car World is Heading to Scottsdale

"Happy New Year from all us at Black Book! January is arguably the biggest month in the collectible car world, with Scottsdale, Arizona taking center stage, featuring auctions presented by Barrett-Jackson, RM Sotheby's, Russo and Steele, Gooding & Company, Bonhams, Silver, and Leake...and we can't forget Mecum's Kissimmee, FL sale!"

Eric Lawrence, Principal Analyst - Specialty Markets

0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% -0.10% -0.20% -0.30%

-0.25% Muscle Cars

Percent Change from Dec 2019 to Jan 2020

0.52%

0.20%

0.06%

0.31%

Pony Cars American Classics Sports Cars

Exotic Cars

0.33% Classic Trucks

? Mecum's Kansas City auction, held at the downtown Convention Center, saw its sales total reach just over $9,000,000. The event witnessed 410 of 585 vehicles change hands, for a respectable sell through rate of 70%.

? McCormick's Palm Springs, California auction had the final numbers come in at $5,750,000 on the sale of 330 of 522 registered vehicles, with a sell through of just under 65%.

? RM Sotheby's Formula 1 Abu Dhabi Grand Prix sale, the first collectible car auction ever held in the Emirate and the first to take place at an F1 Grand Prix, generated over $31,000,000 in total sales with an approximate sell through rate of 60%. Silverstone and Worldwide also held sales in the Middle East, in Riyadh, Saudi Arabia, but attendees report that while a few high dollar sales were made, the overall results were disappointing.

Notable Recent Auction Sales Include:

2015 Ferrari FXX K.

Courtesy of RM Sotheby's.

2017 Pagani Zonda Aether $6,812,500 (RM Sotheby's) 2015 Ferrari FXX K $4,281,250 (RM Sotheby's) 1956 Mercedes-Benz 300SL Gullwing $1,581,250 (RM Sotheby's) 2011 Aston Martin One-77 $1,440,625 (RM Sotheby's) 1993 Porsche 911 by Singer $825,000 (RM Sotheby's) 1984 Peterbuilt 359 Ultra Custom TT "Thor" $13,000,000 (Worldwide) 2005 Ford GT Coupe $247,500 (Mecum) 1969 Ford Mustang Boss 429 Fastback $231,000 (Mecum) 2018 Dodge Challenger SRT Demon $126,500 (Mecum) 1954 Chevrolet Corvette Roadster $78,100 (Mecum)

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SPECIALTY MARKETS: Recreational Vehicles

January 6, 2020

RV Values Continue Their Seasonal Decline

"Happy New Year from all of us at Black Book! We are solidly within the heart of winter now, and we are seeing typical seasonal patterns with regard to RV values. Motor Homes have dropped for the second month in a row, and Travel Trailers and Fifth Wheels saw their third consecutive decline. We expect this trend to continue for another month or two until dealers begin to stock up for the spring selling season."

Eric Lawrence, Principal Analyst - Specialty Markets

55000 50000

Motor Home Value Trends

45000

40000

35000

30000

Jan-15 Feb Mar Apr May June July Aug Sept Oct Nov Dec

Jan-16 Feb Mar Apr May June July Aug Sept Oct Nov Dec

Jan-17 Feb Mar Apr May June July Aug Sep Oct Nov Dec

Jan-18 Feb Mar Apr May June July Aug Sep Oct Nov Dec

Jan-19 Feb Mar Apr May June July Aug Sep Oct Nov

For Motor Homes (including Class A, B, and C) ? Average selling price was $45,384, down $909 (1.9%) from the previous month. ? One year ago, the average selling price was $43,132. ? Auction volume was up 4.4% from the previous month. The average model year was 2012.

17000 16000 15000 14000 13000 12000 11000 10000

9000

Travel Trailer and Fifth Wheel Value Trends

Jan-15 Feb Mar Apr May June July Aug Sept Oct Nov Dec

Jan-16 Feb Mar Apr May June July Aug Sept Oct Nov Dec

Jan-17 Feb Mar Apr May June July Aug Sep Oct Nov Dec

Jan-18 Feb Mar Apr May June July Aug Sep Oct Nov Dec

Jan-19 Feb Mar Apr May June July Aug Sep Oct Nov

For Towables (including Travel Trailers and Fifth Wheels) ? Average selling price was $14,121, down $1,067 (7.0%) from the previous month. ? One year ago, the average selling price was $12,593. ? Auction volume was up 6.5% from the previous month. The average model year was 2012.

4

SPECIALTY MARKETS: Powersports

January 6, 2020

Powersports Values Continue to Decline

"As we enter the New Year, the Powersports Market is still in the middle of its winter doldrums. Pricing is down nearly across the board, with only the Snowmobiles showing signs of life at the moment. All other segments are down, but by mostly smaller amounts than last month.

Scott Yarbrough, Senior Analyst - Motorcycle & Powersports

Motorcycle & Powersports Percent Change Dec 2019 to Jan 2020

2.0%

1.0%

1.0%

0.0% -1.0%

-0.4%

-2.0% -3.0% -4.0% -5.0%

-2.1%

-2.0% -2.3%

-2.0%

-3.0% -3.5%

-4.0%

-1.5%

-2.0%

-3.0%

? Now that the Holidays are behind us and we are in both a new year and a new decade, it's that annual point in time where we take stock of where we have been, where we are, and where we are going. As for where we have been, last month we mentioned the fairly large nature of the drops in value for most segments and how they were reminiscent of years past, where larger swings in value, both up and down, were the norm. This is one of the biggest changes in the Powersports Market we have seen over the past decade. At the start of the 2010s, monthly changes in the market as the seasons progressed were much larger than at the end of the decade. We have referred to this as a "flattening" of the market. This, along with the rise in both sales volume and pricing of Utility Vehicles, coupled with the well-documented softening of the market for large domestic V-Twin cruisers, are the two main storylines over the past decade.

? As for where we are going, that is the more interesting question. Of the two trends mentioned above, the "flattening" of pricing throughout the year has recently shown some signs of reverting to past trends with larger month to month changes, but it is still too early to say if this will be a long-term trend. It is, however, something to keep an eye on. As for the increased interest in, and market-share gains for the Utility Vehicles, coupled with the declining interest in big V-Twin cruisers, those trends appear to be gaining steam as we head into the 2020s.

5

SPECIALTY MARKETS: Heavy Duty

January 6, 2020

Heavy-Duty Truck Values Fall at Year End

"Wholesale prices in December showed increased depreciation as used supply continues to outpace demand for commercial units."

Josh Giles ? Principal Automotive Analyst

Monthly Change

$0 -$200 -$400 -$600 -$800 -$1,000 -$1,200 -$1,400

Average Wholesale Value Changes (Market)

Construction/Vocational

Over the Road Trucks & Tractors

Regional Tractors

2019 has been an interesting year for used truck prices. We began the year strong; however, production issues would slow the delivery of new units. This forced fleets to keep units in service longer than forecasted, resulting in higher mileage units flooding the used market when new inventory was finally delivered. It's a buyers' market. There is simply not enough freight and too many trucks and trailers in the used market. We expect transaction prices to continue a downward trend through the second half of 2020 as the industry finds a way to absorb this equipment.

DATE 01/01/20 12/01/19

Construction/Vocational

Value $ Change % Change

98,141

-2,752

2.7%

100,892

-1,064

-1.0%

Over the Road Trucks & Tractors

Value $ Change % Change

76,209

-1,443

-1.9%

77,651

-1,008

-1.3%

Regional Tractors

Value $ Change % Change

68,037

-1,748

-2.5%

69,785

-1,385

-1.9%

MODEL YEARS 2017-2018 2017-2018

? 2017-2018 HD Construction/Vocational segment decreased an average of $2,752 (2.7%) in December, compared to the average drop of $1,064 (1.0%) in November.

? 2017-2018 HD Over the Road Tractor segment dropped an average of $1,443 (1.9%) in December, compared to the average drop of $1,008 (1.3%) in November.

? 2017-2018 HD Regional Tractor segment dropped an average of $1,748 (2.5%) in December, compared to the average depreciation of $1,385 (1.9%) in November.

DATE 01/01/20 12/01/19

Construction/Vocational

Value $ Change % Change

53,418

-969

-1.8%

54,386

-504

-0.9%

Over the Road Trucks & Tractors

Value $ Change % Change

33,692

-537

-1.6%

34,229

-178

-0.5%

Regional Tractors

Value $ Change % Change

27,367

-689

-2.5%

28,056

-501

-1.8%

MODEL YEARS 2009-2016 2009-2016

? 2009-2016 HD Construction/Vocational segment dropped an average of $969 (1.8%) in December, compared to the $504 (0.9%) average depreciation in November.

? 2009-2016 HD Over the Road Tractor segment dropped an average of $537 (1.6%) in December, compared to $178 (0.5%) average depreciation in November.

? 2009-2016 HD Regional Tractor segment dropped an average of $689 (2.5%) in December, compared to the average drop of $501 (1.8%) in November.

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SPECIALTY MARKETS: Medium Duty

January 6, 2020

New Inventory Continues Adding Downward Pressure to Used Equipment Prices

"Used truck prices dropped more in December than November as used inventory

continued to increase, and dealers looked to clear as much inventory as possible

before the end of the year."

Andrew Floto ? Automotive Analyst

DATE 01/01/20 12/01/19

Value 45,985 47,706

Medium Duty

$ Change % Change

-1,721

-3.6%

-967

-2.0%

MODEL YEARS 2017-2018 2017-2018

DATE 01/01/20 12/01/19

Value 21,337 21,836

Medium Duty

$ Change % Change

-499

2.3%

-355

-1.6%

MODEL YEARS 2009-2016 2009-2016

? Late Models (2017 ? 2018) dropped an overall weighted average of $1,721 (3.6%) in December, compared to the $967 (2.0%) depreciation seen in November.

? Older Models (2009 ? 2016) dropped an overall weighted average of $499 (2.3%) in December, compared to the

$355 (1.6%) drop in November.

+$200 $0

-$200 -$400 -$600 -$800 -$1,000 -$1,200 -$1,400 -$1,600

Nov '18

Feb '19

CHANGES IN WHOLESALE VALUE MODEL YEARS 2015 TO 2017

May '19

Aug '19

Nov '19

CLASS 4 CAB/CHASSIS CLASS 5 CAB/CHASSIS CLASS 6 CAB/CHASSIS CLASS 7 CAB/CHASSIS LIGHT-DUTY PICKUP TRUCKS

? All Medium Duty segments continue to increase in depreciation as both new and used inventory increases. ? Retail sales numbers suggest demand has slowed, as many OEMs have reported a decline in new unit sales over

the past couple of years. ? We expect wholesale values to continue a downward trend through the first quarter of 2020; however, month over

month depreciation is expected to slowly decline. ? Fuel prices remain stable and are expected to remain just above $3.00 per gallon for 2020. Currently, the national

average for diesel is $3.05 per gallon, which is $0.09 less than this time last year.

U.S. Average Diesel Prices (This Year vs. Last Year)

$3.50

$3.00

$2.50

12/24/18 01/07/19 01/21/19 02/04/19 02/18/19 03/04/19 03/18/19 04/01/19 04/15/19 04/29/19 05/13/19 05/27/19 06/10/19 06/24/19 07/08/19 07/22/19 08/05/19 08/19/19 09/02/19 09/16/19 09/30/19 10/14/19 10/28/19 11/11/19 11/25/19 12/09/19

Diesel/This Year

Diesel/Last Year

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