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One nightclub at a time.And the best one is here in Birmingham!

February 20-22, 2014

Is the market one big Brrrrr!

February 18, 2014

Is the market one big Brrrrr? Holidays and Southern Snow Does everything happen on Wednesday?

Other than the values the primary topic has been the weather

Recent survey report: “the sale started late, cars were out of order and it just wasn’t the typical organization.”

What does this do to the values?

Creates a 2000 unit auction, almost double normal run list

Black Book tracks the variables as well as the block bidding

Car Segment Changes

January 10-Jan -78 17-Jan -58 24-Jan -72 31-Jan -48

February 7-Feb -43 14-Feb -47 21-Feb -40

yr ago 2/15/2013 -18

Car Segment Changes

SCC & ELC: Most consistent and stable It is what it is, transportation 3 week avg: -$21 & -$19 6 week avg: -$28 & -$24

PLC: larger $ change, 6 week avg: -$107

PSC: Just not sports car weather 6 week avg: -$145

Truck Segment Changes

January 10-Jan -55 17-Jan -55 24-Jan -64 31-Jan -44

February 7-Feb -49 14-Feb -38 21-Feb -67 (we feel a temporary change)

yr ago 2/15/2013 -19

Both improving as weeks pass, but not as strong or stable as last year

Truck Segment Changes

FVW & FVC: most stable and consistent 3 week avg: -$10

FSU: truck based 4x4 doing well 3 week avg: -$12

LSU & FXU: largest $ movement 3 week avg: -$109 & -$90

CXU: volume units and very competitive 3 week avg: -$56

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Volume Affects Depreciation Expectations

Looking Back at 2013 Depreciation levels driven by increasing used inventory

2014 Prediction: -13.5%

Annual2 – 6 Year

Olds

Looking Back at 2013

Hybrids/Electrics

Spread is closing in all mixes!

$2398

$1748

$1416

Looking Back at 2013

New car sales – 15.6M: 1 million growth over 2012

New Lease penetration continued through year-end

EOT Lease Returns continued to grow: consider as part of new car trade-ins

A change in the trade-in mix Older Trades:

Pre-recession 2 – 4 years 2011 & 2012 8 – 11 years Second half 2013 3 – 4 & 8 – 11 years

Lending growth continued supporting new and used sales Buying deeper, greater LTVs and longer terms Value trends used more for risk analysis

Looking Ahead

New Vehicle Sales: Less Growth 16,056,123

Off-Lease Volume: part of the trade-in count Only about 30K more trades yr over yr About 3.1M total EOT

Slight increase in rental turn-ins with retail sales joining the mix

??? How many will make it to the physical auction?

Looking Ahead Gas price impact

Next 2 months – expect by $.25 to $.30 per gallon

Highs of $3.75 to $3.85 in 2014 2013 averaged $3.49, 2012 was $3.65

Wide gap gas/diesel

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Looking Ahead

Incentives: Cash on the hood Lease focused

Payment spread new to used Back to pre-recession differences

Residual forecasting Hybrid and EV retention vs. gas models in 2014 Need is for more accurate or additional residual forecasting to help

lenders spot the right opportunities

Continued truck segment strength

Entry Level and Compact Cars: Not overly optimistic

$ Start $ End $ Change % Change

Full Size Pickup Trucks

Overall market change: -7.7% -12.4% -12.8%

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Compact Pickup Trucks

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Mid-Size Pickup Trucks

Overall market change: -7.7% -12.4% -12.8%

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Factors:

• Economy: construction within the commercial and residential markets, and service industry demand

• Supplies/Volumes

• Gas Prices

• Revised Models

• Increasing average used pricing

Forecast: Jan 2014/Jan 2015 overall: -13.5% FPT forecast: -9.0% to -10.5%

Why the FPT have and will do better than the market?

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Entry Level Cars

Overall market change: -7.7% -12.4% -12.8%

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Compact Cars

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Why these expectations?

• New market is artificially forced volumes• CAFÉ requirements: 34.5/54.5MPG• Current and short term gas prices• Revised models of mid-size cars

• Close to same mpg• More size and comfort

• Forecast:• Jan 2014/Jan 2015 overall: -13.5%• ELC: -15.5% to -16.5%• SCC: -14.5% to -16.0%

Questions?

Just call or emailTim West

770.533.5230TWest@BlackBookUSA.com

Ricky Beggs770.533.5221

RBeggs@BlackBookUSA.com