Southeast-region auctions are seeing a seasonal increase in values driven by tax-return-driven buying at dealer lots, but say the spring bump isn't as pronounced in 2017 in part due to the delay by the IRS to issue returns in late February.
"The last three years, the spring bump usually happens the first week of February," said Corey Sanford, general manager of America's Auto Auction in Atlanta. "That did not happen this year. It was one of the worst Februarys in five years. We saw a spike in prices the first week in March."
The first week of March brought a 70% conversion rate for Sanford's auction, but it tapered off to 65% in the second week. In earlier years, the auction sustained a 70% conversion rate over up to six weeks. The auction runs about 1,000 vehicles a week with a mixture of 80% dealer cars and 20% fleet vehicles with no former rental cars.
Cars have been making somewhat of a comeback and have closed some of the gap with pickup trucks, who remained strong sellers for the auctions who spoke with Vehicle Remarketing.
Car values increased at the Memphis Auto Auction as a result of a new market of buyers with subprime credit scores wanting late-model compact and mid-size sedans from local dealers who buy from the auction, said Brandon Derrick, general manager. The dealers have been using the credit acceptance model that provides greater flexibility to allow the buyers to qualify for financing.
"Before this, they were buying a higher mile car," Derrick said. "It's brought a little more value to that mid-size car in the lane."
Derrick also noticed a slower tax buying season in February that improved in March. A warmer start to the year in Memphis has also keep buyers coming to the lanes, he said. INOP (inoperable vehicle) sales have been strong for salvage buyers and online sales have focused on off-lease rental units, Derrick said.
"It's been a warm year for us and that has definitely helped keep customers out in the lanes in the auction and has helped the retail lots," he said.
Virginia's Richmond Auto Auction said tax refunds pumped up values on passenger cars, and truck demand remains strong. Dealer incentives have affected the values of 2016-model-year trucks, especially those nameplates that have heavy retail incentives with 2017-MY units.
Rental consignors have been chafed by buyers opting for the 2017-MY truck over a 2016-MY unit due to similar prices, said Wyatt Carter, assistant general manager.
"The 2016 truck models may be tougher to sell, because of new car retail incentives," Carter said. "It kind of hurts customers like your rental companies, and your fleet customers who hold so tight to their numbers and don’t want to budge. Dealer incentives are affecting the 1- to 2-year-old vehicle in the lanes more than they traditionally would."
Editor's note: This is part of an ongoing series that goes beyond the numbers to provide a snapshot of market conditions in the vehicle remarketing industry in the Northeast, Southeast, Midwest, Southwest, Rocky Mountain and Pacific regions. The Southeast includes Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia.