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Bill Cieslak Vice President PHH Arval

Bill Cieslak Vice President PHH Arval. Analysis of today’s used vehicle market. 2008 year in review. Major market drivers Fuel prices Housing industry Overall economic challenges And most recently… funding. Fuel prices impact the market.

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Bill Cieslak Vice President PHH Arval

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  1. Bill Cieslak Vice President PHH Arval Analysis of today’s used vehicle market

  2. 2008 year in review • Major market drivers • Fuel prices • Housing industry • Overall economic challenges • And most recently… funding

  3. Fuel prices impact the market • Early ’08 thru mid year, fuel was the largest factor • The worst performing month was June • Truck prices declined significantly • Mid-size sedans became more popular • Compact and hybrid prices became over valued

  4. Housing industry impacts • The dramatic decline in construction reduced truck values: • Used fleets trucks are popular with contractors • The quick decline in demand, combined with high fuel prices created an over supply of truck inventories • New and used truck values were impacted • Many Consumers abandoned their trucks for daily commutes

  5. Economic challenges • Market impact from tight credit • Consumers: • Rate increases • Less credit for sub prime • Shorter payment terms • Reduced credit lines for credit cards, home equity and auto loans • Business: • Increased cost to borrow • Shortage of funding

  6. Trends in the car & truck market • Information from Black Book • (used with permission)

  7. Challenging Used Market Trucks and SUVs

  8. Better Used Market Entry & Mid-Size Cars

  9. Crazy Prius 2006 Prius AVG Wholesale $21,000 $20,000 $19,000 $18,000 $17,000 $16,000 $15,000 5/1/2008 8/1/2008 9/1/2008 7/1/2008 4/1/2008 6/1/2008 10/1/2008

  10. 2008/2009 Build Levels Sample of Two Manufacturers Full Size Car Vans* Crossover Compact Car Full Size Car Full Size Trucks Full Size Trucks Mid & Full Size SUV Mid Size Car Full Size SUV - 50% - 40% - 30% - 20% - 10% 0% 10% 20% 30% 40% 50% Build Level Change : 2008 to 2009 * Limited to a single vehicle.

  11. New Car Residuals Best/Worse* by Segment Entry Level Car Best Compact Car Worse Mini Van Upper-Mid Size Car Near Luxury Car Full-Size Car Mid-Size Pickup Full-Size SUV Luxury SUV Full-Size Pickup - 15.0% - 10.0% - 5.0% 0.0% 5.0% * Comparing 2008 and 2009 Available New Car 36-Month Residuals as of Sept. (112 vehicles total)

  12. New Car Residual* Change New Car Residual Losers New Car Residual Winners 2009 2008 2009 2008 -11.8% Chevrolet Avalanche Pontiac Vibe +6.5% -11.8% Jeep Commander Chevrolet HHR +6.0% -12.3% GMC Yukon Buick Enclave +5.8% -13.8% Nissan Armada Scion xD +5.5% -15.5% Hummer H2 Ford Focus +4.5% -17.6% Cadillac Escalade 0.0% 20.0% 40.0% 60.0% 0.0% 20.0% 40.0% 60.0% 10.0% 30.0% 50.0% 10.0% 30.0% 50.0% Retention Value [%] Retention Value [%] * 36-Month

  13. Diesel Over Gas Premium 3 Year Old Used Car Return MSRP Sep. 07 Dec. 07 Apr. 08 Oct. 08 Silverado Pickup : $5,310 $6,200 $6,900 $6,400 $3400 Dodge Ram : $5,955 $6,200 $6,900 $6,400 $3400 F250 6.0L : $5,100 $6,500 $6,900 $6,400 $3400 Liberty : $2,687 $2,200 $2,200 $2,200 $ 900 New Beetle : $1,240 $1,500 $1,500 $1,500 $1700 Jetta : $1,220 $2,000 $2,000 $1,500 $2000 E320 CDI : $1,000 $2,500 $3,200 $3,000 $3200 Diesel Fuel March 17, 2007 $2.68 / gal (U.S. Nat. Avg) March 17, 2008 $3.80 / gal +$1.30 / gal

  14. Diesel Over Gas Premium 3 Year Old Used Car Return : Sept. 07 Dec. 07 Apr. 08 Oct. 09 Silverado Pickup : 117% 130% 120% 64% Dodge Ram : 104% 116% 107% 57% F250 6.0L : 127% 135% 125% 67% Liberty : 82% 82% 82% 33% Jetta : 164% 164% 164% 138% New Beetle : 121% 121% 121% 164% E320 CDI : 250% 320% 300% 320%

  15. Hybrid vs. Gas Values

  16. Hybrid vs. Gas Values

  17. Option vs. MSRP Used 2006 Models Small Model Year Small Avg Mid Mid Avg Large Large Avg Option - 2006 MSRP Used MSRP Used MSRP Used Leather 863 412 975 450 1091 742 min/max 695/1200 200/500 385/1600 300/700 800/1600 300/1350 Sunroof 744 275 1054 404 1014 494 min/max 585/900 200/400 695/1900 350/500 795/1450 450/600 Navigation 1563 200 2318 338 500 min/max 940/1950 200/200 1800/2995 200/600 200/800 V6 over 4 Cyl 1675 0 1235 825 min/max 1350/2000 425/2000 300/1800 V8 over V6 3600 400 1239 944 min/max 2000/5200 250/600 945/2000 300/1600

  18. Data Delivery»Web Services, XML & HTML Portal Applications » Xpress Portfolio/Inventory Analysis » API Solutions » Service Solutions » Database Solutions » Custom/Tailored Solutions » Client Server Applications Delivery Options

  19. Budgeting for fleet in tough economic times

  20. External cost factors • Fuel costs • Ordering and delivery • Depreciation • Maintenance and repairs • Tire costs • Accident costs • Interest rates • Vehicle prices

  21. Internal factors • Fleet size • Type of vehicle • Mileage profile • Replacement policy • In service terms

  22. Preparing your 2009 budget • Strategic planning • Plan proactively for trucks • Selector decisions – right vehicle for right job • Downsizing of vehicles/alternate fuel vehicles • Optimize fleet size • Plan selector with resale in mind • Re-evaluate lease terms for a challenged UVS market

  23. Preparing your 2009 budget • Other ideas: • Fuel purchase policies • Consider Personal Use chargeback • National accounts for maintenance/repairs • Consult with finance department on interest rates • Budget for higher costs in 2009 • Delay replacement of executive vehicles

  24. Questions and Discussion?

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