Industry Update for Larry H. Miller Automotive

1. Industry UpdateforLarry H. Miller Automotive 1/19/11

2. Auction Industry Offers Unique Vantage Point From Which to Assess Industry Trends Generally speaking, markets know more than the people who write about them” Jim Grant • Daily interaction with all the players • Manufacturers, captive finance companies, banks, credit unions, sub-prime lenders, rental companies, and commercial fleets • Dealers: franchised, independent, and wholesalers • Used vehicle market is: • Large: $370 billion annually at retail in the U.S. • Inextricably entwined with new vehicle market • More representative of the national population than the new vehicle market • Real-time pricing information • Derived in a competitive-bid process with knowledgeable parties on both sides of the transaction • A view of future supply trends into the used vehicle market

3. Topic outline • Economic environment • New and used vehicle retail markets • Wholesale used vehicle pricing and supply

4. The recovery: an upward slanted “W” The reasons why • Financial crisis leaves lasting scars • De-leveraging is slow and painful process • Policymakers add obstacles and uncertainty • Second dip in housing is likely • Quantitative easing part deux • Lasting weakness in the labor market

5. Nonfarm Payrolls Increase by1.1 Million in 2010 Monthly Change in Nonfarm Payrolls (in thousands) Source: Bureau of Labor Statistics

6. Monthly Change In Nonfarm Payrolls3-month moving average – in thousands Source: Bureau of Labor Statistics

9. Initial Jobless Claims Show Signs of Improvement Initial Jobless Claims - Four-Week Moving Average Source: Bureau of Labor Statistics

10. Personal Income & Wages and Salaries Year-over-year percent change based on 3-month moving average Source: Bureau of Economic Analysis

11. Retail Sales Recover from Summer Slowdown Retail Sales, excluding motor vehicles - Monthly Percent Change - Seasonally Adjusted Source: U.S. Department of Commerce

12. Savings Rate Rises Personal Savings as % of Disposable Personal Income Source: Bureau of Economic Analysis

13. Household net worth dips againin second quarter of 2010 Percent Change from Previous Quarter Source: Federal Reserve Board

14. Household net worth recovers, but remains $11 trillion below its peak. Household Net Worth – In Trillions

15. New and Used Vehicle Retail Markets

16. New Vehicle Sales New Car & Light-Duty Truck Sales millions of units Peak-to-troughs: 1973 to 1975 -24% 1978 to 1982 -33% 1986 to 1991 -23% 2000 to 2009 -41% Source: Automotive News

17. 1966 1982 2009 Annual % Change in New Vehicle Sales versus % Change in Real GDP 1960 to 2009 Source: Automotive News & Bureau of Economic Analysis

18. New Car & Light-Duty Truck Sales Seasonally Adjusted Annual Rate - 3-Month Moving Average Source: Automotive News

19. Scrappage as % ofVehicles in Operation Source: R.L. Polk

20. Ratio of New Vehicle Sales to Number of Households Source: Automotive News & U.S. Dept. of Commerce

21. Annual Growth of Vehicles in Operation Five-year Moving Average - In Millions Source: R.L. Polk

22. Used Vehicle Production New Vehicle Sales:A long-term perspective New Car & Light-Duty Truck Sales millions of units Source: Automotive News

23. Vehicles in Operation from 2 & 3 Model Years Past (in millions of units)

24. Vehicles in Operation from 6, 7, & 8 Model Years Past (in millions of units)

25. Used Vehicle Retail Sales Source: CNW Marketing Research

26. Used Vehicle Sales Inherently More Stable then New Vehicle Sales • In 25 of the last 33 years, the absolute % change in new vehicle sales was greater than for used vehicles. • Used vehicle retail sales perform considerably better than new vehicles during an economic recession. • The simple correlation between changes in new vehicles sales and real GDP is .79; for used vehicles it is only .54 • Used vehicle sales are more of a “need” rather than discretionary purchase. There is also substitution from new purchases to used purchases during times of economic weakness. Source: Automotive News & CNW Marketing Research

27. Ratio of Used Vehicles Retailedto New Vehicles Retailed Source: Automotive News & CNW Marketing Research

28. % Change Used Units Retailed – Same Store Basis (Publicly-traded Dealership Groups) Weighted average for KMX *, AN, PAG, SAH, GPI, ABG, and LAD *KMX shifted forward one month to correspond with calendar quarter Source: Company filings

29. Wholesale Supplies

30. New Vehicle Sales Into Rental &Rental Fleet Size Source: Bobit Business Media

31. New Vehicle Sales into Rental Source: Bobit Business Media

32. Distribution of New Vehicle Sales into Rental - Program versus Risk Source: Bobit Business Media & Manheim Consulting

33. Average Auction Price – Rental Risk Units Source: Manheim Consulting

34. Average Mileage – Rental Risk Units Source: Manheim Consulting

35. New Lease Originations Millions of Units Source: Manheim Consulting

36. Lease Penetration Ratesby Manufacturer Source: J.D. Power and Associates

37. Ford Credit Auction Values at Constant Third Quarter 2010 Mix Source: Ford Credit

38. GMAC Sales Proceeds as % of ALG – U.S. Lease Terminations Source: Ally

39. Off-Lease Volumes – Another Down Cycle Ahead Source: Manheim Consulting

40. Repossession Volumes Decline in 2010 Millions of Units Source: Manheim Consulting

41. Repossession Frequency & Severity –Ford Credit 2007 2008 2009 2010 Source: Ford Motor Credit

42. Source: GM Financial

43. Credit Default Rates Source: S&P / Experian

44. Auto ABS Issuance (in billions) Source: Securities Industry and Financial Markets Association

45. New Vehicle Sales into Commercial and Government Fleets Source: Bobit Business Media

46. New Vehicle Sales to Commercial Fleets Source: Bobit Business Media

47. What Drives Dealer Consignment Volumes • Level of new vehicle sales • Level of retail used vehicle sales • Gross margin and inventory turn for retail used vehicles • Dealership wholesaling percentages • Share of wholesale volume captured by NAAA member auctions

48. The Forecast: Dealer Consigned Vehicles Sold at NAAA Member Auctions Source: 1999-2009 NAAA Surveys, 20010-2015 Manheim Consulting estimate

49. Auction Volumes Source: Manheim Consulting

50. Concept: A single measure of used vehicle price change that is independent of underlying shifts in the characteristics of vehicles being sold Manheim Used Vehicle Value Index • All Manheim U.S. sales (5+ million annually) • Classify by market segment • Account for shifts in mileage • Weight to provide unchanging mix • Seasonally adjust Steps: