Issue Date: Car Dealer Insider July 15, 2012, Posted On: 8/1/2012
Trend Spotting
Eric Arnum, in his Warranty Week article, notes that when it comes time to budget for warranty work, planners expect a Ford to cost twice as much as a Honda; a Fiat to cost twice as much as a Ford; and a Mercedes to cost twice as much as a Fiat. Currencies play a role in their planning, but so does selling price, parts cost and local labor rates. Every time a vehicle is sold, its manufacturer sets aside enough funds to finance the amount of warranty work they expect it to require over the life of its warranty. The surprising thing is how widely these accrual rates vary worldwide. Usually, accrual rates are calculated as a percentage of revenue.
Volkswagen has always spent the greatest share of its revenue on warranty costs, with its decade-long accrual rate varying between 4.9% and 5.8% of revenue.
Wholesale used vehicle prices continued to soften cyclically and seasonally, says Tom Kontos of ADESA Analytical Services. The average sales price for all vehicles sold at auction fell below $10,000 for the first time since February, signaling an end to this year's characteristically strong Spring/Tax season.
According to ADESA Analytical Services' monthly analysis of Wholesale Used Vehicle Prices by Vehicle Model Class, wholesale used vehicle prices in June averaged $9,893 - down 3.7% compared to May and down 3.6% relative to June 2011. As gasoline prices softened in June, prices for car segments fell more dramatically (down 4.4% month-over-month and 6.9% year-over-year) than for truck segments (down 3.0% and 0.9%, respectively).
Based on data from CNW Marketing/Research, retail used vehicle sales in June were up 8.1% month-over-month and 1.9% year-over-year for franchised dealers, but down 1.6% and 8.0%, respectively, for independent dealers - an indication that both inventory and traffic favors franchised dealers in the current used vehicle market environment. June sales of certified used vehicles were up 3.3% month-over-month and 8.9% year-over-year based on data from Autodata.
