NPA data shows off-season surge at auction
The final three weeks of December brought a surprising increase in wholesale activity, according to data provided to Powersports Business by National Powersport Auctions.
“We saw an unseasonably strong climb in December, then an unusally soft start in January,” said NPA COO Jim Woodruff. “The last two weeks of January have been on the rise again, so much that it seems like the spring market is already upon us.”
Why the off-season surge? A perceived healthier economy, smarter dealers and a lack of sales overall in the winter of 2012 might all have played a role.
“December is typically one of the slower auction months,” Woodruff said. “In years years, February and March is where we’ve started to see strength. December of 2011 was pretty typical, but this year, December 2012, was surprisingly strong. What we mean by strong is strong volume, strong prices and strong attendance. It was all strong in all those measures. Attendance was good and product volume was better than we expected, particularly volume coming from dealers. The most interesting thing is that the pricing was a couple of points higher than the preceding month, which is definitely better than what we typically see for December. So that left us thinking that maybe spring was starting early. Then in the first two weeks of January, we were like ‘What happened?’ It wasn’t terrible, but the momentum that we saw in December didn’t translate into those first two weeks of January. They were softer than expected.”
The holiday effects, with New Year’s Day in the middle of the week, might have had something to do with the slow start in January.
“The holidays could be part of it. But we don’t attribute it fully to that, because when somebody needs product, they need product,” Woodruff said. “We don’t have a simple explanation for what happened, which implies that it was a mix of factors.
“The other thing it could be is that December was so strong and there was optimism avbout a positive outcome to the fiscal cliff and other things going on, followed by early pessimism followed right at the beginning of the year as the fiscal cliff and other things drug on without a clear solution. Once that air cleared out, the doubt and uncertainty dissipated. We saw strength return in the last half of the month due to a number of factors. But we don’t typically see that type of a blip in December, when everyone’s normally relaxed and enjoying the holidays. Usually the new year is when we start to see increasing strength.”
Woodruff anticipates the strength shown in late January will be a sign of things to come.
“We do see both the availability and appetite for product, as well as the associated strength in pricing, building through the spring and early summer,” he said. “As the season fades and everybody has what they need, we expect more normal seasonal effects through summer as well.”
What dealers who attended the Powersports Business State of the Industry webinar learned via Woodruff might have given them a leg up on their peers.
“The dealers who have been looking at all these charts and graphs could see that it looks like the season starts in Jan.-Feb., so perhaps they said to themselves ‘I better get started in December now,’” Woodruff said. “And I’m only half-kidding. The smart dealer knows there’s a seasonal effect and those with sufficient capital and valuation knowledge can leverage that.”
Woodruff related perhaps dealers had more capital that they’ve had in previous years.
“Anyone can say ‘Yeah, spring is when the prices are strongest.’ It’s also when the volume is highest. It’s the reverse of typical supply and demand effects, but if you don’t have the money to sit on products for six months or the appetite for risk to sit on something for that long, then you’re going to wait to buy closer to the season and be willing to pay a little bit more as a result. What we may be seeing with the December effect is dealers may have said ‘Hey, I’m feeling good enough about 2013 to put some money down now.’ In addition, they may have thought, ‘I have some money I can put down now, either in my pocket or through a financing source.’ So those two dynamics could be affecting the decision about when a good time to buy is, and therefore be why we saw a little stronger December.”
NPA’s Dealer Financing program has been well received by dealers.
“We’ve seen far greater interest and participation in our flooring program than we expected,” Woodruff said. “That tells us that dealers can sell as much as they can get their hands on, and if they can use some intelligent debt and financing, they can make more money.”
Woodruff noted that dealers are effectively balancing the proper amount of credit — not too much and not too little.
“If you can use somebody else’s money to make money, it’s smart to do so. But a lot of dealers are still hurting from 2008 when they got burned and they’re being much smarter about it now,” he said.
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