ADESA, the nation's second-largest used-vehicle auction company, expects an uptick in sales of off-lease vehicles, especially in the second half of the year, said the top executive at its parent company.
"There is no question that commercial volume is expected to increase in 2013," said Jim Hallett, CEO of KAR Auction Services Inc., during a conference call detailing KAR Auction's first-quarter results.
"We will begin to see the anniversary of these lease originations that were written in 2010 as we get into the second quarter, but the real impact of these lease returns is expected to be seen in the second half of the year," he said.
Hallett predicted industrywide auction sales volume will increase to 8.5 million units in 2013 and 9 million in 2015, up from 7.9 million reported by National Auto Auction Association members in 2012. The 2012 total does not include about 300,000 units ADESA sold through openlane.com, Hallett said.
KAR Auction acquired Openlane Inc., an online only remarketing company, in October 2011.
KAR Auction finished integrating its adesa.com and openlane.com platforms in April. The merged platform is accessed at adesa.com; openlane.com has been discontinued. Online transactions accounted for 34 percent of ADESA's sales in the first quarter, Hallett said.
The company also added features to the site, such as the integration of third-party valuation data into its market guide and tools for consigners to manage remarketing online.
KAR Auction said its first-quarter net income rose 12 percent to $29.1 million, as revenue rose 10 percent to $557.6 million.
At ADESA, net income surged 74 percent to $15.7 million as revenue rose 5 percent to $283.6 million and sales volume rose 3 percent.
KAR Auction's adjusted net income for the quarter does not include a $10.8 million pretax net loss related to processing vehicles damaged in Superstorm Sandy last fall by its salvage auction arm, Insurance Auto Auctions Inc.
KAR Auction said in a statement: "The significantly higher tow costs incurred in order to respond to the requirements of our customers, increased occupancy costs due to the leasing of temporary locations to process Superstorm Sandy vehicles and increased labor costs for the temporary work force brought into the New York and New Jersey area resulted in a net loss on the sale of the Superstorm Sandy vehicles."
At ADESA the conversion rate -- the percentage of vehicles offered for sale that were sold -- dropped to 61 percent in the first quarter from 63 percent in first quarter last year.
That is because the company sold a higher percentage of vehicles on consignment for dealers, which typically have a lower conversion rate, Hallett said. Of the vehicles sold at ADESA physical auctions in the first quarter, 47 percent were sold on consignment for dealers, up from 46 percent a year earlier.