Analysis from Kelley Blue Book’s Analytic Insights Team

BLUE BOOKMarket Report

www.kbb.com

Robyn Eagles | Director, Public Relations949.268.3049 | reagles@kbb.com

Joanna Pinkham | Senior Public Relations Manager949.268.3079 | jpinkham@kbb.com

Brenna Robinson | Public Relations Manager949.267.4781 | berobinson@kbb.com

Kelley Blue Book Public Relations Contacts:

In This Issue:MARKET ANALYSIS Overseas Demand Driving Prices Up; Good Condition Vehicle Supply Remains Challenged at Auction; More

LATEST HOT USED-CAR REPORT Gas Prices Drive Shopper Interest in Fuel-Efficient Vehicles

FEBRUARY 2011

MARKET ANALYSIS:

Overseas Demand Driving Prices Up at Auction for Select Vehicles- Juan Flores, director of vehicle valuation, Kelley Blue Book- Alec Gutierrez, manager of vehicle valuation, Kelley Blue Book

Annual Subscription Value: $500

A ccording to Kelley Blue Book field analysts, many wholesalers at auction are snatching up fully loaded, black luxury SUVs specifically for customers overseas. Willing to pay above market price, these wholesalers are not concerned with the

status of the vehicle’s title, frame damage, or mileage.

Kelley Blue Book field analysts report that a large amount of cars are going directly from auctions to the ports. The highly desired vehicles for exports include fully loaded Cadillac Escalades, Hummer vehicles, all Mercedes models, and also the Infiniti FX35 and QX56. These vehicles are reportedly being shipped to areas such as Russia, Dubai, Israel, Poland, Africa and Japan. Analysts also report seeing a large Russian contingent filling orders (pre-sold units, in most cases already paid for). Frame damage is not a factor since it isn’t disclosed in many of these regions. Another reason the condition of these vehicles is irrelevant to wholesalers is that automotive data reporting companies are not well-known outside the U.S. and are not commonly used to track the car’s history.

Exporters are driving the prices up and local dealers can’t compete in the bidding war. Additionally, the online auction simulcast and resulting Internet sales are pinching dealers out of business because of increased competition coming in from around the world. Auction volume for these vehicles is likely relatively low, so it shouldn’t have a significant impact. However, Kelley Blue Book analysts are seeing this trend mostly among auctions close to major sea ports.

EXPORTERS ARE DRIVING THE PRICES UP AND LOCAL DEALERS CAN’T COMPETE...- KELLEY BLUE BOOK ANALYTIC INSIGHTS

2 BLUE BOOK Market Report FEB 2011

MARKET ANALYSIS:continued

A s consumers hold on to their vehicles longer and OEMs cutback production in 2008, fair-to-poor conditioned vehicles are becoming more predominant in the market. In early 2003, vehicles of fair condition accounted for just more than 10 percent of overall auction volume, while the remaining 90 percent was comprised of vehicles of good condition or better.

Today, vehicles of fair condition account for nearly 30 percent of overall auction volume, with the remaining 70 percent made up of vehicles of good condition or better. With overall auction volume down and good-condition, low-mileage vehicles harder to find, values may increase slightly. These supply challenges will continue to increase competition among dealers for the most desirable vehicles; ultimately, increasing prices for not only dealers, but also consumers. However, these current supply conditions could help mitigate depreciation on vehicles with less than average fuel economy as gas prices continue to climb.

Good Condition Vehicle Supply Remains Challenged at Auction

0%

10%

20%

30%

40%

50%

60%

70%

80%

Jan-

03M

ay-0

3Se

p-03

Jan-

04M

ay-0

4Se

p-04

Jan-

05M

ay-0

5Se

p-05

Jan-

06M

ay-0

6Se

p-06

Jan-

07M

ay-0

7Se

p-07

Jan-

08M

ay-0

8Se

p-08

Jan-

09M

ay-0

9Se

p-09

Jan-

10M

ay-1

0Se

p-10

Jan-

11

% o

f Tot

al A

uctio

n Vo

lum

e

"Good" Condition Volume Declines at Auction

Fair Good Very Good Excellent

Source: KBB Internal Auction Data

0

50

100

150

200

250

300

Jan-

03M

ay-0

3Se

p-03

Jan-

04M

ay-0

4Se

p-04

Jan-

05M

ay-0

5Se

p-05

Jan-

06M

ay-0

6Se

p-06

Jan-

07M

ay-0

7Se

p-07

Jan-

08M

ay-0

8Se

p-08

Jan-

09M

ay-0

9Se

p-09

Jan-

10M

ay-1

0Se

p-10

Jan-

11Auction Volume Index (January 2003 = 100)

Source: KBB Internal Auction Data

3FEB 2011 BLUE BOOK Market Report

MARKET ANALYSIS:continued

Gas Prices Not High Enough to Impact Values

W hile gas prices continue to creep up, used-vehicle values have yet to respond. Gas prices have increased

12 percent since October 1, 2010, from $2.75 to $3.09 and fuel-sensitive segments show no sign of faltering. In fact, these large vehicle segments continue to outperform the market. Full-size trucks (1.8 percent), luxury sport utility (0.7 percent), mid-size sport utility (0.7 percent) and full-size sport utility (0.7 percent) each showed market strength. Some vehicle segments that offer great fuel economy also are doing well, including compact crossovers (1.4 percent), hybrid crossover (1.2 percent) and compact car (1.1 percent).

Even with slight increases in gas prices, consumers have yet to change their purchase

decisions. A January 2011 Kelley Blue Book Market Intelligence survey revealed that 70 percent of in-market car buyers are considering fuel-efficiency when making a purchase decision. If prices continue to rise at the current rate and surpass the $3.50 threshold, values could begin to drop for segments offering average or less than average fuel economy, while analysts expect that values for fuel-efficient vehicles would rise, similar to what the industry experienced in 2008. Given current local and global economic uncertainty, affordability among shoppers remains a top priority, putting fuel prices back on the table as an issue when purchasing a vehicle. In the same Market Intelligence survey, almost half (43 percent) of car shoppers reported delaying the purchase of a vehicle due to economic concerns and gas prices. Moreover, 75 percent of kbb.com survey respondents said they expect gas prices to rise in the next 30 days, and data from the U.S. Energy Information Administration reveals that gas prices are projected to rise throughout 2011 and into 2012.

Market Intelligence Survey - Press Release: http://mediaroom.kbb.com/kelley-blue-book-nearly-three-quarters-car-shoppers-say-gas-prices-influenced-vehicle-purchase-consideration-expect-gas-prices-increase

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

7-Ja

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-00

17-N

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02-

Mar

-01

15-J

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128

-Sep

-01

11-J

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226

-Apr

-02

9-A

ug-0

222

-Nov

-02

7-M

ar-0

320

-Jun

-03

3-O

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316

-Jan

-04

30-A

pr-0

413

-Aug

-04

26-N

ov-0

411

-Mar

-05

24-J

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57-

Oct

-05

20-J

an-0

65-

May

-06

18-A

ug-0

61-

Dec

-06

16-M

ar-0

729

-Jun

-07

12-O

ct-0

725

-Jan

-08

9-M

ay-0

822

-Aug

-08

5-D

ec-0

820

-Mar

-09

3-Ju

l-09

16-O

ct-0

929

-Jan

-10

14-M

ay-1

027

-Aug

-10

10-D

ec-1

0

$/G

allo

n

Gas Prices on the Rise, Still Below 10-Year PeakGas Diesel

Source: Economy.com (Oil Price Information Service)

4 BLUE BOOK Market Report FEB 2011

MARKET ANALYSIS:continued

Mid-Size Car Segment Shows Shifting Interest

-18.0%

-10.9%

-9.6%

-5.3%

0.6%

14.7%

-25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25%

Chevrolet Malibu

Honda Accord

Ford Fusion

Toyota Camry

Nissan Altima

Hyundai Sonata

12 Month Depreciation - MY 2010 Mid-Size Cars

Change in Rank of Mid-Size Cars ( Jan 2010 - Jan 2011)MY2010 VehicleHonda AccordNissan AltimaHyundai SonataToyota CamryChevrolet MalibuFord Fusion

-18.0%

-10.9%

-9.6%

-5.3%

0.6%

14.7%

-25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25%

Chevrolet Malibu

Honda Accord

Ford Fusion

Toyota Camry

Nissan Altima

Hyundai Sonata

12 Month Depreciation - MY 2010 Mid-Size Cars

T he Honda Accord remains a top choice with the highest value in its segment. Although the Accord currently maintains the highest value of all vehicles in the mid-size car segment, values are down 11 percent over the past 12 months. Improved redesigns from most manufacturers in this segment have increased the level of competition dramatically. For example, the

Hyundai Sonata has shown the most improvement, rising three positions based on model-year 2010 trade-in value rank. Sonata values improved 14.7 percent during the past 12 months, perhaps due in part to a halo effect in response to the well-received model-year 2011 redesign. Conversely, after a much needed redesign in 2008, the Chevrolet Malibu has already started to show signs of aging, declining significantly over the past 12 months. Malibu depreciated more than any other vehicle in the segment, dropping 18 percent over the past 12 months. Toyota Camry remains in the middle of the pack due to its conservative design in an increasingly competitive segment. Analysts still hold strong to the belief that Toyota’s recall has not affected used values of high selling Camry. Camry values are only down 5 percent over the past 12 months.

5FEB 2011 BLUE BOOK Market Report

MARKET ANALYSIS:continued

New Year, New Market Strength

V alues are up 0.6 percent overall in January. As in previous years, values have picked up as dealers return to auction and restock inventory. Values should remain relatively steady in the short term with the potential to pick up as we approach the spring selling season in March and April.

It should be noted that values could increase at a greater rate than normal and in a shorter period of time due to recent auction closures. Within the last few days, most of the central and portions of the northeast regions have seen historic snow levels, cancelling many airport and auction services. Even though inventory levels may build up at auction, the expectation is that demand will thaw out of the blizzard and increase prices accordingly.

-1.1%

-1.0%

-0.7%

-0.5%

-0.2%

-0.1%

-0.1%

0.2%

0.2%

0.3%

0.4%

0.5%

0.6%

0.6%

0.6%

0.7%

0.8%

0.9%

1.3%

1.5%

1.7%

2.1%

-2.0% -1.0% 0.0% 1.0% 2.0% 3.0%

Hybrid Car

Mid-Size Pickup Truck

Luxury Car

Sports Car

Full-Size Crossover

Luxury Sport Utility

Full-Size Sport Utility

Minivan

Van

Hybrid Sport Utility

Full-Size Car

Hybrid Crossover

Mid-Size Sport Utility

Market Average

Subcompact Car

Compact Crossover

Mid-Size Car

Luxury Crossover

Compact Car

Hybrid Pickup Truck

Full-Size Pickup Truck

Mid-Size Crossover

Monthly Change by Segment (MY08-10)

-2.0%

-1.2%

-1.1%

-1.0%

-0.7%

-0.7%

-0.6%

-0.2%

-0.1%

-0.1%

0.1%

0.1%

0.4%

0.6%

0.8%

0.8%

1.1%

1.1%

1.4%

2.4%

3.8%

-4.0% -2.0% 0.0% 2.0% 4.0%

Suzuki

Honda

Isuzu

BMW

Volvo

Mitsubishi

Saab

Daimler

Pontiac,Saturn,Hummer

Jaguar,Land Rover

Toyota

Volkswagen

GM

Market Average

Subaru

Chrysler

Nissan

Hyundai

Mazda

Ford

Mercury

Monthly Change by Manufacturer (MY08-10)

6 BLUE BOOK Market Report FEB 2011

MARKET ANALYSIS:continued

This commentary focuses on model years 2008-2010. The statements set forth in this publication are the opinions of the authors and are subject to change without notice. This publication has been prepared for informational purposes only. Kelley Blue Book assumes no responsibility for errors or omissions.

Some Segments Continue to Drop in Strong Used-Car Market

S egments such as sports car, luxury car and hybrid car continue to drop even in a strong used-car market, dropping 0.7 percent, 0.9 percent and 0.9 percent, respectively. These segments are likely the most impractical cars given today’s economy. The average duration of unemployment is currently at 35 weeks and the unemployment rate is at 9.4 percent.

Given the current stagnation in employment conditions and consumer confidence, Kelley Blue Book expects values for these vehicles to remain soft.

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-10

Diesel

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Consumer Confidence Remains Low

Source: Economy.com (The Conference Board)

0

5

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15

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25

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Jan-

80No

v-80

Sep-

81Ju

l-82

May

-83

Mar

-84

Jan-

85No

v-85

Sep-

86Ju

l-87

May

-88

Mar

-89

Jan-

90No

v-90

Sep-

91Ju

l-92

May

-93

Mar

-94

Jan-

95No

v-95

Sep-

96Ju

l-97

May

-98

Mar

-99

Jan-

00No

v-00

Sep-

01Ju

l-02

May

-03

Mar

-04

Jan-

05No

v-05

Sep-

06Ju

l-07

May

-08

Mar

-09

Jan-

10No

v-10

Wee

ks

Average Duration of Unemployment at a Historic High

Source: Economy.com (BCI)

7FEB 2011 BLUE BOOK Market Report

HOT USED-CAR REPORT:

Gas Prices Drive Shopper Interest in Fuel-Efficient VehiclesKelley Blue Book’s Hot Used-Car Report captures monthly used-car shopper activity on kbb.com, including a list of the top and bottom movers in the same time period. Results are provided by the Kelley Blue Book Market Intelligence Team, in an effort to help dealers better understand which used ve-hicles consumers are looking at most each month.

About Kelley Blue Book (www.kbb.com) Founded in 1926, Kelley Blue Book, The Trusted Resource®, is the only vehicle valuation and information source trusted and relied upon by both consum-ers and the industry. Each week the company provides the most market-reflective values in the industry on its top-rated website www.kbb.com, including its famous Blue Book® Trade-In and Retail Values, and Fair Purchase Price, which reports what others are paying for new cars this week. The company also provides vehicle pricing and values through various products and services available to car dealers, auto manufacturers, finance and insurance com-panies, as well as governmental agencies. Kbb.com is a leading provider of new car prices, used car values, car reviews, new cars for sale, used cars for sale and car dealer locations. Kelley Blue Book Co., Inc., is a wholly owned subsidiary of AutoTrader.com.

J anuary 1, 2011, marked a change in the calendar date and for the automotive industry. Shortly after the ball dropped in Times Square, consumers began to take notice of the price at the pump. With higher fuel prices, those in the used-car market began to flock toward fuel-efficient vehicles. The three segments that experienced the greatest rate of change were

hybrid cars, hybrid crossovers, and sub-compacts, increasing 17.1 percent, 10.8 percent, and 7.1 percent in shopper interest, respectively. As gas prices continue to rise, Kelley Blue Book analysts expect this trend to continue. When at auction, it would be wise for dealers to begin considering fuel-efficient models as they stand to perform well if gas prices continue at their current rate of appreciation.

-31.5%

-24.9%

-24.8%

-24.8%

-24.2%

-22.9%

-22.6%

-21.4%

-21.1%

-20.5%

27.9%

28.0%

28.5%

29.0%

30.5%

30.9%

33.6%

36.2%

37.1%

45.7%

-60% -30% 0% 30% 60%

2008 MERCEDES-BENZ GL-CLASS

2007 BMW X3

2009 CHEVROLET CORVETTE

2008 LAND ROVER RANGE ROVER SPORT

2008 MERCEDES-BENZ ML-CLASS

2007 SUBARU OUTBACK

2006 LAND ROVER RANGE ROVER SPORT

2006 CHEVROLET SUBURBAN 1500

2009 GMC YUKON

2007 LEXUS LS

2008 TOYOTA PRIUS

2006 MITSUBISHI GALANT

2005 CHEVROLET AVEO

2007 PONTIAC G5

2009 NISSAN CUBE

2008 DODGE CALIBER

2006 KIA OPTIMA

2008 MAZDA MAZDA5

2007 DODGE DURANGO

2007 PONTIAC TORRENT

% Change in Share Month-Over-Month

Monthly Used-Car Shopping Activity Growth Top/Bottom 10 Models

Information based on 2009 to 2005 model year vehicles

-10.7%

-9.5%

-5.4%

-4.9%

-3.7%

-3.7%

-2.0%

-1.3%

-0.1%

-0.1%

0.4%

1.8%

2.0%

2.6%

4.5%

4.8%

4.9%

7.1%

10.8%

17.1%

-20% -15% -10% -5% 0% 5% 10% 15% 20%

Luxury Sport Utility

Luxury Crossover

Full-Size Sport Utility

Van

Luxury Car

Sports Car

Full-Size Pickup Truck

Mid-Size Sport Utility

Mid-Size Crossover

Compact Crossover

Mid-Size Pickup Truck

Mid-Size Car

Full-Size Car

Minivan

Full-Size Crossover

Hybrid Crossover

Compact Car

Subcompact Car

Hybrid Sport Utility

Hybrid Car

% Change in Share Month-Over-Month

Monthly Used-Car Shopping Activity Growth Segments

Information based on 2009 to 2005 model year vehicles