Very Good Year for Auctions

LAS VEGAS — Last year was “a very good year,” Manheim President and CEO Dean Eisner says of the auction arena. “It just keeps getting better.”

That's echoed by Chief Economist Tom Webb as he unveils Manheim's “2007 Used Car Market Report” at the National Automobile Dealers Assn. convention here.

Although the industry saw only a slight increase in used-vehicle sales last year, the wholesale market itself reached its strongest level in years, he says.

Vehicles sold at wholesale at U.S. auto auctions increased to 9.57 million — a 1.8% rise that ended two consecutive years of decline. In addition, average wholesale prices were up 1.6%.

That piece of good news comes in the midst of turbulent times for the auto industry. “In 2006, we saw layoffs; we saw employee buyoffs, plant closings and supplier concessions,” Webb says. “And of course we also saw billions of dollars in red ink.

“But if you take a step back and you look at each one of the actions the manufacturers have taken, you'll find that each and every one was measured, and it was reasoned, and it was necessary,” he adds.

Wholesale commercial fleet-vehicle and light-truck prices sold at auction increased more than 5%, the report says.

For a third year in a row, new lease originations increased, rising to 2.8 million. However, Manheim says off-lease volumes bottomed out and are set to begin rising at modest levels.

Used vehicles continue to be a vital source of profit, bringing in $230 per unit last year. This increase comes as dealers on average lose $14 on every new vehicle they sell.

Not such good news is the repossession rate, which following two years of decline rose 5%.

Webb says franchised dealers may need to look in new directions for income in 2007, but opportunities will be there.

“(Dealer) profit opportunities are going to change, but they will continue to grow,” he predicts.