Used Car Auction Commentary from ADESA July 7, 2003 - Prices Going Back Up?

Hi Everyone,
From the various indicators ADESA Analytical Services maintains on
auction and used vehicle market trends, we believe the wholesale used
vehicle market has reached an "inflection point." Attached are results
from our monthly analysis of Wholesale Used Vehicle Prices by Model
Class. (The analysis is based on the AuctionNet database of nearly six
million annual sales transactions from approximately 150 of the largest
U.S. wholesale auto auctions, including those of ADESA (40 U.S.
auctions) as well as other auction companies. ADESA Analytical Services
has segregated the AuctionNet database using the J.D. Power and
Associates Vehicle Segmentation Guide to study trends by model class.
This information is posted monthly on www.adesa.com/KontosKorner.)
Auction prices in June were down from year-ago levels, but at a much
lower rate than previous months, and prices are improving ever so
slightly month-to-month. Average prices in June were up over $200 (2.5%)
from their trough in April and represent the second consecutive monthly
increase. We expect that prices will continue to compare more favorably
(though still negatively) to the depressed prices seen last summer, when
zero-percent financing was re-introduced.
Other factors that lead us to believe that the worst is over for the
used car market include:
1) New vehicle incentives are not having as much positive impact on new
vehicle sales, and the negative impact they have had on used car prices
may be leading some retail customers back into the used car market.
2) Preliminary data on retail used car sales in June shows the first
year-over-year increase this year in sales by independent dealers. This
is an important constituency in the used car market that has been
competitively disadvantaged for several months, as shoppers flocked to
franchised dealers for new and used vehicle purchases -- often bringing
attractive trade-ins with them.
3) Auction inventories, according to the ADESA Auction Inventory Index,
were down relative to year-ago levels for the first time beginning in
mid-May and remain down currently. This means the oversupply of
late-model units provided to auctions by the manufacturers and their
captive finance arms has been worked-off.
4) The ADESA Auction Dealer Optimism Index was up for the second
consecutive month in June, meaning that dealers purchased a higher
percentage of vehicles offered for sale by other dealers at ADESA
auctions than they did in June last year. This is an indication of
stronger market conditions as well as more realistic price expectations
on the part of sellers.

We hope you find this information useful. To schedule an interview with
Tom, please call.

Thanks!

Cordially,
Beth King, APR

Beth King, APR, Market Research and Public Relations Manager 
ADESA Corporation 
310 E. 96th Street 
Suite 400 
Indianapolis, Indiana 46240 
Voice: 317.249-4233 
Fax: 317.818-7970 
Cellular: 317.507.8911 
e-mail: bking2@adesa.com 
Web site: www.adesa.com