ATLANTA — Manheim chief economist Tom Webb gave some
examples of retail sectors that might give a "true sense of the psyche of many
used-vehicle buyers."

So what kinds of businesses should dealers and finance companies watch besides
traffic to their own stores? Webb recommended that managers concentrate on
specific businesses and retail sectors, most notably Walmart, dollar stores and
casual dining restaurants.

"First-quarter results and second-quarter guidance from all
of these sectors suggest that the financial health and confidence of most
used-vehicle buyers is improving only slowly," Webb said in the May Auto
Industry Brief produced by Manheim Consulting.

"At Walmart, North American same-store sales declined for
the first time in seven quarters and the CFO stated ‘our customers are still
stretched,'" Webb continued. "Results for casual dining establishments were, at
best, lackluster.

"We expect that the spending power and confidence of most
used-vehicle buyers will remain relatively subdued," he went on to say. "After
all, the biggest recent improvements in the economy have concentrated in the
equity markets and home values. That helps higher-income households
(new-vehicle buyers), but mainstream America needs faster growth in weekly
incomes."

Webb offered more general economic commentary in the brief,
again taking a cautious approach as the United States slowly creeps out of the
recession.

"The near term outlook for the economy appears to be clear
sailing, but don't interpret that too optimistically — it will be "sailing,"
not motor boating. In fact, a better expression would probably be ‘smooth
rowing' since many business sectors will have to keep on working — and with
some degree of synchronization — to keep the economy moving ahead.

"And, given the outsized influence of the Federal Reserve,
it could be said we have a coxswain that not only gives commands to the rowers,
but also alters the river currents," he continued. "That, as noted last month,
makes it difficult for economists to call the outcome of the race."

Webb went on to mention that the pace of new-vehicle sales
leveled off as expected in April, also noting signs that retail used-vehicle
sales may be doing the same.

"Nevertheless, the flow of funds into retail financing
remains impressive and that will keep used-vehicle sales at a healthy level.
Wholesale used vehicle prices declined again in April, but the movement was
neither unexpected nor disruptive to the market," Webb said.

And speaking of credit, Webb touched on another potential
troublesome point when answering a question about the swelling number of
student loans.

"Throughout the recession and even during the current
recovery, consumers have delevered. credit card debt, which use to be the
biggest form of non-mortgage debt, peaking at $866 billion in the fourth quarter
of 2008. It now stands at $660 billion," Webb said.

"Auto debt peaked at $820 billion in late 2006, fell to $710
billion during the recession, and now stands at $794 billion," he continued.

"Meanwhile student loan debt escalated over the past decade
without even a hiccup during the recession. Student loan debt outstanding,
which was $241 billion in 2003, is now nearly $1 trillion," Webb added.

Webb will be among the industry experts giving presentations this week during the NAF Association's
17th annual Non-Prime Auto Financing Conference. SubPrime Auto Finance News published a complete preview of the conference here.

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