That’s according to separate analyses released Monday by Cox Automotive and Black Book.

Cox Automotive’s Manheim Used Vehicle Value Index fell 7.0% year-over-year in December and dropped 0.5% month-over-month, coming in at 204.0.

Wholesale prices were up close to 33% from December 2019, Cox said, but have slowed 21% since the December 2021 peak.

“We ended 2023 with about half of the used-vehicle value decline we saw in 2022, but still more than we’d see in a typical year,” Cox Automotive chief economist Jonathan Smoke said in a news release.

Black Book’s Used Vehicle Retention Index closed the year by dropping 10.9% year-over-year in December and falling 1.7% from November, coming in at 151.0.

Still, the index is up 32% from last pre-pandemic reading in March 2020.

“Wholesale prices continued to decline in December at a higher than usual (pre-2020) rate, but the depreciation was slower than in November,” Black Book chief data science officer Alex Yurchenko said in a release. “We saw a drop in the conversion rates at the auctions, which is typical this time of the year.

Looking forward, Black Book said January should see auction activity increase with dealers acquiring inventory for the spring market.

“As OEMs push more incentives to move new inventory, used wholesale prices are expected to decline in January although not as rapidly as in the last quarter of 2023,” Yurchenko said.

Looking forward, Cox is projecting its Manheim index will have increased 0.5% year-over-year in December of this year. It anticipates “muted fluctuations” in used-vehicle values and less volatility, given the recovery in wholesale volumes  in the last year. Both wholesale and retail markets have moved “more toward equilibrium,” the company said.

“For 2024, the key word for the wholesale market is ‘normalcy.’ Manheim expects constrained growth with a volume increase of less than 1%,” Smoke said. “As for price patterns, we anticipate a normalization trend, and we expect that 2024 will be the first year in five where we will experience fairly normal depreciation in the wholesale market.”

Added Cox Automotive senior director of economic and industry insights Jeremy Robb: “As we move into 2024, it’s important to note that used-vehicle values increased faster than the overall rate of inflation.

“So, even though prices have come down over the last two years, they are still about 33% higher than at the end of 2019,” Robb said. “More normal declines will likely be seen in the coming years, but the average value of a wholesale unit will continue to be higher than in the past.”

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The company’s Q1 Used EV Market Report found the average listing price of a 2017-2019 Tesla Model 3 has dropped below $30,000. That’s an important milestone because it puts them in play for the federal used EV tax credit of up to $4,000, since the actual purchase price is often less than the listing price.

The report noted the Model 3 offers significantly greater battery range than other EVs currently qualifying for the tax credit and said some 300,000 Models 3s were sold in the U.S. from 2017 to 2019.

As a result of the rise in longer-range models and EVs eligible for the tax rebate, Recurrent’s report forecast a sharp increase in used EV sales in 2024, predicting that by the end of the year a used EV will be sold every minute on average, with sales reaching 558,982 units.

That would be a jump of 42% over 2023 and up 97% from 2022.

“Our market indicators suggest that we are at the start of an inflection point for used electric cars in the U.S.,” Recurrent CEO Scott Case said in the report. “Shoppers no longer need to choose between range and affordability. A used EV shopper can drive home in a Tesla for less than $25,000.”

Another factor in that equation is the readiness of dealers to sell used EVs.

Beginning this year, dealerships must register with the Treasury Department to offer the $4,000 point-of-sale discounts on used EVs. But the Recurrent report found that while more than 7,000 dealerships have registered, just 7% of the 200 dealerships surveyed last month said they had taken steps to participate.

“As a used EV shopper, you definitely want to get this $4000 discount, but the rules aren’t straightforward,” Case said, adding shoppers need to know “which dealers, which vehicles and which buyers qualify.”

The full report is available here. Recurrent has also released a guide to the EV tax credits as well as a list of registered dealerships.

$16 million Series A funding round completed

In other news from the company, Recurrent announced it has completed its $16 million oversubscribed Series A funding round to scale out its used EV battery reports.

The funding round was led by ArcTern Ventures, with additional investment from Automotive Ventures, Goodyear Ventures, Wireframe Ventures, Pioneer Square Labs and others.

“Used EV value is unequivocally driven by a vehicle’s range and battery,” ArcTern Ventures partner Ian Pinnington said. “ArcTern conducted extensive primary research to develop the high conviction that Recurrent’s data-driven solution is not only the right approach, but is in a standalone market-leading position.

“As Recurrent continues to become a standard in the used EV ecosystem, we believe the company will inform all used EV transactions.”

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The data and analytics firm’s 2023 Automotive Brand Loyalty Study found just 21% of used-vehicle owners who bought their next vehicle used went on to repurchase the same brand again, which is actually a 1% increase from the previous year.

Used-vehicle owners who bought new vehicles were more loyal, but not by much, staying with the same brand 26% of the time.

In contrast, 51.3% of new-car owners bought the same brand for their next new-car purchase, up from 49.7% in 2022, led by Tesla’s 60.7% loyalty rate, up from 59.0%.

LexisNexis analyzed vehicles and owners that make up a garage, using 107 million U.S. garages to calculate automotive brand loyalty from January through December 2023.

The study found about 62% of new-vehicle purchases in 2023 included a trade-in, while 26% added a vehicle to a garage and 11% of new-vehicle purchases were made by owners who did not have a vehicle in the garage — which includes first-time buyers and those who had gone an extended period without a vehicle.

“Automakers can further build brand loyalty by connecting with used-car owners and offering services to them as if they were the original owners,” said Dave Nemtuda, LexisNexis Risk Solutions’ head of OEM products, U.S. connected car. “That connection could be the shift that automakers need to see an uptick in brand loyalty and customer engagement with their brand on many levels.”

More about the study is available here.

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As a new year unfolds, bringing fresh goals, evolving regulations, and expanded opportunities, let’s delve into the five pivotal trends that promise to shape the industry’s future.

Dealerships pivot towards commercial customer obsession

In a changing economy where inflation and interest rates have hit the brakes rapidly for retail buyers, dealerships are likely to pivot towards commercial customers.

These customers operate on a different clock — one that ticks loudly, demanding immediate solutions.

The indispensable role of commercial vehicles, generating $2,000 to $3,000 per day per vehicle for businesses, underscores the urgency for efficient solutions. These customers can’t wait for interest rates to lower or the market to settle. Their industries are resilient through economic highs and lows — meaning vocational businesses ensure a consistent demand for commercial vehicles for dealerships.

In addition to needing vehicles to support their business now, commercial customers are also grappling with the complexities of running a business today. Many businesses and industries are feeling pressure from government regulations, as well as society, to integrate electric vehicles and net-zero carbon solutions into their fleets.

New technologies like telematics offer data and insights that businesses need to operate efficiently. These complexities open avenues for new dealership services, and the key lies in cultivating relationships built on trust to guide commercial customers through this changing terrain.

Commercial EVs find their niche in specific use cases

Commercial customers certainly recognize the societal benefit of a fleet that sports the label “electric” or “net-zero” compared to the negative impression of an idling gas or diesel vehicle. As the societal appeal of sustainable fleets gains traction, commercial electric vehicles face practical limitations, particularly in vocations with diverse operational needs.

A utility company in a rural area with harsh winters or unpredictable violent storms, for instance, may find EVs impractical. However, specific use cases, such as fixed-route delivery and transport buses, present ideal opportunities for electrification. These vocations with predictable and short-range routes where vehicles can return to a garage or depot that can support charging are prime for adoption. Anticipate a surge in solutions tailored to specific use cases, ensuring a balanced integration of EVs into commercial fleets.

Fixed ops takes center stage with commercial service bays

With revenues short on the retail side, dealerships will not only look to commercial sales to keep business moving, they’ll also look to other commercial revenue opportunities. Commercial customers can’t wait weeks for a vehicle to be serviced. Dealerships who offer dedicated commercial service bays or who provide mobile service offerings enhance their value.

Commercial customers offer many opportunities for dealerships, but fixed ops poses potentially the greatest potential with a staggering 85-90% of commercial customers currently servicing their fleet outside of dealerships. It’s an untapped market that dealers can employ immediately.

Urban final mile: The fastest growing vocation with electric bikes

Giant idling box trucks present an unsightly scene, initiating a traffic nightmare and blocking streets for even small package deliveries. As cities restrict truck access, urban final mile delivery becomes a hotbed for growth, and electric bikes emerge as the ideal solution for navigating congested city streets. Expect a surge in the adoption of eBikes customized for efficient last-mile delivery in urban markets, where traditional trucks face logistical challenges.

AI drives efficiency in commercial sales processes

The commercial sales landscape is becoming more intricate, with an array of products ranging from vehicles to software, charging solutions, and services. In response, 2024 is poised to unveil a new era of AI-powered solutions, revolutionizing customer prospecting and relationship management. This shift will empower dealerships to navigate the complexities of commercial sales efficiently, allowing them to offer a more tailored and technology-driven approach to their B2B customers.

In the fast-paced realm of commercial automotive, 2024 promises to be a year of adaptation, innovation, and customer-centric evolution. Dealerships embracing these trends will position themselves at the forefront, steering the industry towards a future where commercial vehicles not only meet business needs but also align seamlessly with the changing dynamics of our world.

Kathryn Schifferle is chief vision officer at Work Truck Solutions

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I have participated in hundreds of events, both inside and outside this industry as an exhibitor, sponsor or attendee. As a result, I have developed some methods to help select the ‘right’ venues and events for business and staff development. Over the course of 2024, I will present information about several industry events, and provide dealers (and vendors) with factors that they should consider when selecting events for their staff (or themselves) to attend.

There are several important questions to ask.

For a dealer:

—Who from my team will get the most benefit from attending?

—What should attendees expect to happen at the event?

—What is the format of the event?  Will there be both learning and an expo hall?

For a vendor:

—Will my customers be there in enough quantity to make it worthwhile?

—What is my most significant objective?  And will I have the means to accomplish it?

—What is the format of the event?  Do we need a booth? Is there a speaking opportunity?

First up: NADA Show 2024

Every year, the National Automotive Dealers Association hosts a major event referred to as the Super Bowl of the automotive industry. The show boasts more than 3,500 dealership leaders and more than 500 exhibitors. World renowned speakers and industry luminaries participate in the educational sessions. Dealers worldwide come to learn, discover innovative solutions, meet their factory representatives, walk the expo floor and generally do business, network and have a good time.

At NADA, a dealership’s entire vendor family is in one place — as well as all of the factory reps. It allows a dealer to explore multiple solutions available and make decisions. Dealership leaders from all over the country find value.

Shaun “Niff” Kniffin, Marketing and Technology Director for the Germain Motor Company, has attended over 15 NADA conferences.

In Niff’s words, “It’s really useful for the GM and the dealership leadership team to go together.” This allows those teams to selectively meet with both existing and prospective partners so that they can learn what solutions will best solve their dealerships together.  His preferred meetings are the small face-to-face meetings that help him get to know their industry partners.

April Simmons, corporate internet and marketing director at Horne Auto Group has been to only a few NADA’s.

She recommends that dealers and GMs attend NADA because technology partners always launch new products and solutions there. However, she warns “NADA is huge. Make a plan before you go. There are valuable learning sessions and vendors to meet, but you have to give yourself time to travel in between meetings.”

For Joe Hansen, director of corporate fixed operations at Cardinale Automotive Group, NADA allows him to meet with vendors face-to-face. “So much business is done virtually, and NADA allows me to see people in person and help me  understand the people behind the products,” says Joe. Joe finds the learning sessions to be very valuable.  But, he says “the biggest value is in networking and developing a camaraderie with both his team and his partners.”  Who should attend?  Joe says Service Managers, GMs and Owners should make the time to walk the show.

Vendors and partners approach the NADA conference with caution.

It is a big show — and a big expense. Nonetheless, it is common to believe that there is more value in attending the show than skipping it. The opportunities to participate are endless: exhibit, attend learning sessions, speak in a learning session, or even host a party.

Eric Schlesinger, CEO of ActivEngage, has attended 20 NADA’s in multiple capacities — as a dealer, vendor and allied partner. He unequivocally recommends participating in NADA. LIke the dealers above, Eric says “The biggest advantage is to be able to meet with our partners at one event.  We are able to be face-to-face with people, get ideas and sometimes solve problems in meetings that would otherwise be difficult to schedule.”

JT Thomson, serial entrepreneur and CEO of MOJO Platform, requires his staff to attend learning sessions. And, he believes the value extends far beyond the first sale. “It’s all about relationship-building, not necessarily the sales effort,” JT says.

According to Shane Stender, senior vice president and managing partner of Silverback Advertising, “The education is great not only for themselves but also for sharing the ideas and insight with dealers who are not able to attend. We are able to act as a conduit to share technology and ideas” with their customers.

Not all vendors agree that exhibitors should expect an immediate ROI. According to Chris Kerr, chief revenue officer for Clarivoy, “It can be difficult to measure ROI on NADA. The biggest value comes from strengthening relationships with current customers and partners. While we will close deals as a result of the show, it’s really the brand awareness that pays off.”

So, what are the big takeaways?

For dealers:

—Schedule time with your current vendors.

—Pre-set appointments with partners. Don’t forget to include time for your OEM meetings and educational classes.

—Sending a leadership team helps them both learn together and form closer relationships.

For vendors:

—Exhibit if you can. If you can’t, go and attend sessions.

—Get out of your booth and walk the hall. See the innovation for yourself.

—Coach your teams to spend time with both customers and partners.

—Wear good, comfortable shoes!

NADA is around the corner, and time is running out to get your tickets and hotel rooms. If you haven’t been to NADA, make this year your first trip. Download their mobile app and create your daily plan.  Let your vendors know, and you’ll likely receive an invite to dinner or a show. You will definitely reap the rewards!

Next Up:  David Kain’s 19th Digital Success Workshop on April 9-11 in Lexington, Ky.

Jennifer Sanford is an experienced SaaS marketing leader passionate about the retail automotive experience. Jennifer is the founder of Sanford Marketing Group, an agency specializing in B2B marketing strategy and project management. In 2018, Jennifer’s team won the coveted “Booth of the Show” award at the NADA conference. The best results, however, were in the relationships — old and new.

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This episode features a conversation with Steve Greenfield of Automotive Ventures and the industry personality all over social media who is known as CarDealershipGuy.

Listen to the episode in the window below.

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As we navigate from one crisis to another, one reality shines through: We are one resilient industry. I mean come on, what else can they throw at us?

Oh, yeah: 2024 is an election year!

The used-car market is definitely showing signs of declining prices. We knew the market would have to correct itself eventually. The amount of new-car inventory availability is improving and with it, our opportunity to make some choices:

— Do we take what we have learned during the COVID 19 pandemic?

— Can we capture our lease return portfolio for retail inventory?

— Grow the partnership between service and sales?

— Will we continue to use our service department as our best source for quality inventory?

— Find better ways to use our service loaner and internal rental car programs (or at least use our OEM-closed sales) to supply our 1-year-old inventory rather than using external auctions or rentals?

— Can we capitalize on and grow our certified pre-owned programs?

In the industry, we often let our sustainable long-term growth planning be overtaken by a desire for a more robust short-term profitability. This ultimately leads to inevitable bad decision-making and profit losses that erase short-term gains. And that could prevent us from achieving our best results next year.

Robert Grill is senior partner development manager at CARFAX

Read Just The Fax on Auto Remarketing | Follow Our Podcast | Email Bob Grill

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Cox’s new study, “Under the Hood: Opportunities and Challenges in the Service Industry,” found that while franchised dealerships are still vehicle owners’ top choice among service providers, their lead over service chains such as quick lube locations and service centers is shrinking.

The report showed dealership service lanes accounted for 30% of all service visits in the U.S. in 2023, down from 35% in the most recent previous survey in 2021. General repair shops and service stations were a close second at 28%, with tire repair stores, body shops, specialists and other locations accounting for the rest.

Even more striking is that 33% of vehicle owners selected general repair shops as their preferred service provider, pushing that category ahead of dealers for the first time. Dealerships were preferred by 31% of the respondents, down from 35% in 2021.

That shift is driven at least in part by a decline in trust, the Cox report said. Asked why they returned to the dealership where they purchased their vehicle for service, 54% of respondents gave trust as a reason, a drop from 62% two years ago.

The study showed those who selected trust as a reason are more likely to be very satisfied with the service experience and more loyal to the dealer than those who did not.

The study’s results are based on a survey conducted in the second half of 2023 of 2,493 vehicle owners — including 182 electric vehicle owners — who had at least one service performed in the previous 12 months, accounting for more than 5,500 service visits.

In addition, employees with decision-making authority over fixed operations at 525 franchised dealers were interviewed.

The report from Cox Automotive said vehicle owners are driving more and holding onto their vehicles longer because of high vehicle prices and interest rates. As a result, they’re bringing their vehicle in for service or maintenance more often: an average of 2.5 times a year, up from 2.3 in 2021 but down from 2.8 in the pre-pandemic 2018 survey.

“The service business continues to be a key part of any dealership operation,” Cox Automotive senior manager of market and customer research Vanessa Ton said in a news release. “While our report lays clear some of the challenges facing service providers today, the good news is that the industry continues to grow, with more customers going in for service visits, and most providers are seeing a boost in revenue for service.”

As with practically every other industry, automotive care and service costs have risen noticeably, with Cox’s research showing a 45% increase in the average price per service visit since 2021.

So, it’s no surprise that four of the top five reasons vehicle owners cited for not returning to a dealership for service were cost-related. The survey also found dealers believe one of the top reasons new car owners don’t return to them for service is a fear of being overcharged.

But the report showed dealership service costs mostly in line with other service providers, with the average dealership service visit in 2023 costing $258, just $9 more than the $249 average for a non-dealer service provider.

Still, 48% of vehicle owners said they were frustrated with at least one aspect of their recent service experience at a dealership, citing longer than expected waits, dealers pushing additional services, struggles to schedule an appointment and higher-than-estimated prices for the work done.

Price and long waits were among the issues that frustrated electric vehicle owners, the study found, but one major one was the amount of service visits EVs require.

While only 28% of dealers believe EVs require more service than internal combustion engine vehicles, Cox’s report showed the average EV owner visited a service center 2.6 times with 2.8 services performed per visit, compared to the 2.3 and 2.4 for the average gas vehicle. And EV owners spent more time waiting for maintenance (34 minutes longer) and repair work (51 minutes longer) compared to gas vehicle owners.

“There is a general expectation that EVs don’t require service or have minimal service needs, but that is not the case,” Cox Automotive market and customer research manager Kayla Reynolds said. “EVs are new technology and, at this point at least, are in for service more often for warranty work and updates. EVs also tend to require more tire rotation and replacement, as EVs are heavier and harder on their tires.”

Overall, EV owners reported more frustrations with service work than ICE vehicle owners, with finding out how much service costs among the top issues.

According to Cox’s service study, 56% of EV owners (59% of Tesla owners and 50% of all others) said they had at least one frustration with their recent service experience, while just 39% of gas vehicle owners said the same.

“Overall, our latest look at the service industry suggests providers have an opportunity to focus on price transparency and grow trust with their customers,” Ton said. “When it comes to vehicle ownership, repairs and maintenance are important but can present challenges. To overcome those challenges, car dealerships should focus on expanding their service capacity by ensuring they have an adequate number of service bays and well-trained technicians, especially as the demand for electric vehicle services continues to rise.”

You can download a summary of “Under the Hood: Opportunities and Challenges in the Service Industry” here or reserve a copy of the eBook here.

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The Cox Automotive Dealer Sentiment Index for the fourth quarter of 2023 showed a sharp drop from Q3, which Cox analysts attributed to the ongoing adverse effects of high interest rates and a weakening economy on the automotive market, the two factors cited most by dealers as holding back their business.

The quarterly survey found dealer sentiment at all-time lows in several areas, following two quarters of relative stability.

The three-month market outlook index matched its record low of 41 (a score below 50 indicates more dealers feel the market will be weak than strong in the months ahead). For franchised dealers, that index fell to 46, down 12 points from Q3 and the lowest point in the index’s history. The index was down one point to 40 among independent dealers.

The Q4 current market index declined five points to 40, its lowest level since Q2 2020. It marks the sixth consecutive quarter with overall dealer sentiment below the 50 threshold, and the first time since Q2 2020 that franchised dealers’ sentiment has been below 50. Independent dealers’ sentiment, which has been below the 50 threshold since Q3 2022, came in at 38.

“The low scores in the latest survey indicate a challenging market with weak prospects,” Cox Automotive chief economist Jonathan Smoke said in a news release. “Many auto dealers are seeing their profits decline from record highs in 2021 and 2022, and they’re feeling the pinch from high interest rates.

“Their expenses have gone up significantly and the downward pressure on pricing has cut into their margins. Clearly, the market dynamics are much more challenging for automobile dealers and especially franchised dealers than the market of just one year ago.”

Profits, traffic down while costs continue to climb

Another historic low was recorded in the overall profits index, which plummeted to 37, the lowest point on record with the exception of the COVID shutdowns in Q2 2020. That index has been falling steadily since reaching its all-time high of 60 in Q3 2021.

The profits index for franchised dealers dropped seven points from the previous quarter to 51, and among independents it sank to 32 — their ninth consecutive quarter below 50.

Dealership traffic has also been sinking, with dealers overall ranking it down five points from Q3 at 30 on the 100-point scale — 27 for independent dealers and 40 for franchises.

Meanwhile, dealers said operating costs continue to rise, with the Q4 index at 74, marking nine straight quarters above 70. A score greater than 50 indicates costs are growing.

Used and new sales environments sagging

While used inventory availability rose for the second consecutive quarter, dealers viewed the used-vehicle sales environment pessimistically, with the overall index sagging to 39. That’s its lowest level ever, other than the pandemic quarter of Q2 2022 and down from 44 the previous quarter.

Franchised dealers were still slightly on the optimistic side at 51, though that was far down from Q3’s 58, while independents scored the environment substantially lower at 35. All of those scores are well below pre-pandemic levels.

After four quarters of improvement, the new-vehicle sales environment index dropped eight points to 51, one point below a year ago and less than every pre-pandemic measurement. OEM-backed incentives remain small, according to the index, down two points to 26.

Dealers indicated they are also facing pressure to lower prices — especially franchised dealers, whose index shot up seven points from Q3 to match independents’ score of 63.

Interest rates (65%) and the economy (61%) were by far the top two obstacles mentioned by dealers, followed by market conditions (48%), credit availability for consumers (34%), limited inventory (33%), political climate (32%) and expenses (31%).

Dealers expect EV sales to drop

A year ago, franchised dealers felt positively about their EV sales, with an index score of 61. Now, though, Cox’s Q4 report showed that number dropping 11 points to 50, while the overall dealer index sank to 48.

And asked about the outlook for EV sales over the next three months, both franchised and independent dealers said they expect them to decline, with franchises scoring 47 — down nine points from Q3 and 17 points year-over-year — and independents at 40. The overall score of 42 is down 11 points year-over-year and five points from the previous quarter.

All of those numbers are the lowest since the EV question was added to the survey in Q2 2021.

“The excitement that existed a year ago around EVs has definitely faded,” Smoke said. “Although EV sales are growing, supply is growing faster. The EV transition is requiring more effort from dealers than before, so it makes sense that enthusiasm has declined.”

Methodology

The Q4 2023 Cox Automotive Dealer Sentiment Index is based on a survey of 1,036 U.S. auto dealer respondents, comprised of 561 franchised dealers and 475 independents. The survey was conducted from Oct. 24 to Nov. 6, 2023.

Dealer responses were weighted by dealership type and sales volume to represent the national dealer population.

For each aspect of the market surveyed, respondents are given an option related to strong/increasing, average/stable or weak/decreasing, along with a “don’t know” opt-out.

Indices are calculated by creating a mean score in which:

Strong/increasing answers are assigned a value of 100.

Average/stable answers are assigned a value of 50.

Weak/declining selections are assigned a value of 0.

Respondents who select “don’t know” at a particular question are removed from the related index calculation.

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