Good day, everyone, and welcome to the Copart Incorporated First Quarter Fiscal 2021 Earnings Call. Just a reminder, today's conference is being recorded. For opening remarks and introductions, I would like to turn the call over to Mr. John North, Chief Financial Officer of Copart Incorporated. Please go ahead, sir.
Thanks and good morning. During today's call, we'll discuss certain non GAAP measures, which include adjustments to reverse the effect of certain discrete income tax items, foreign currency related gains, certain income tax benefits and payroll taxes related to accounting for stock option exercises and the effect on common equivalent shares from ASC 20 sixteen-nine. We provided a reconciliation of these non GAAP financial measures to the most directly comparable GAAP measures on our website under the Investor Relations link and in our press release issued yesterday. We believe these non GAAP measures together with our corresponding GAAP measures are relevant in assessing our business trends and performance. We analyze our results on both GAAP and non GAAP basis.
In addition, our comments today include forward looking statements within the meaning of federal securities laws, including management's current views with respect to trends, opportunities and uncertainties in our markets, including with respect to the COVID-nineteen pandemic. These forward looking statements involve substantial risks and uncertainties. For more detail on the risks associated with our business, we refer you to the section titled Risk Factors in our Annual Report on Form 10 ks for the year ended July 31, 2020, and each of our subsequent quarterly reports on Form 10 Q. Any forward looking statements are made as of today and Copart has no obligation to update or revise any forward looking statements. And with that out of the way, I will turn the call over to Jay.
Thanks, John. Appreciate it. Well, fiscal 2020 was a record year despite the pandemic. And as we talked about in the last quarter, our people performed across the organization through what was really a year of not just challenges, but a year of unknowns. And we met daily, we course corrected daily, and I'm happy and proud to say that we had an amazing not only record year in terms of results, but in terms of accomplishments.
And Q1 of this year is starting strong, and I believe it's indicative of the year ahead. I was talking to Jeff this morning, 26 years ago, Willis and I went to New York and Copart became a public company. And as I stepped on the streets of New York and saw it for the first time, I was amazed. And when we eventually went public and I saw the inner workings of Wall Street, I was amazed and I was confused. And today, 26 years later, I can't say I understand Wall Street any better.
I think that's probably a good thing. What I do know is a great company when I see it and Copart is a great company. Jeff and John are going to give you guys details today on the quarter, but at the highest level, when we look at Q1, we saw record results, we saw record sale prices and we saw record returns for our customers. And that bodes well for our future. Copart has continued to grow over the years.
We've done that through a process of being prepared. We've done that through excellent technology, the best systems, the best technology in the industry and the best people delivering the best service in the industry, and I see no reason why that's going to change. Just 3 years ago, the entire EBITDA for Copart for the year was nearly $538,000,000 and in this quarter, we generated over $275,000,000 of EBITDA. And we knew this was going to happen. We started a campaign of 3.5, 4 years ago called 202020, where we went out and aggressively started adding land to our existing locations and opening additional new locations.
And then in addition to that, we went out and opened up mega sites for catastrophes all along the Eastern seaboard and all the way over to across the Gulf into Houston. And so we've continued to be prepared. We've continued to spend big on land and we did that again not only in 2020, but in the Q1 of this year. We now have a record number of acres available to us to store cars And that means that we have the capacity for not just the market as it grows and we'll continue to do so with technology and cars, but as we continue to win new business. I view our continued investment in land as continued investment in our future.
And looking forward, we still have a large list of acquisitions that we would like to make. We won't be able to make them all. We won't be able to get the zoning. We won't be able to get the deal done on the land. And as many of you know on the call, some of these acquisitions can take 3, 4, 5 years to come to fruition.
But we have a big pipeline and we'll continue to work on that as we continue to believe in our growth. I'm happy to say that volume assigned is starting to return to pre COVID levels. I actually had a little bit of traffic on the way to work this morning, and we haven't really seen that in 6 months. So volume is almost back to where it was prior to COVID, not quite there yet. We still don't have everybody driving as frequently as they were before COVID.
But clearly, we are starting to see a lot more models driven across the country. Sales still lag volume, and this is obvious that back when COVID started, we were selling off inventory even though we weren't getting big assignment volume. Now we're getting large assignment volume and not selling off the inventory yet. So in the next quarter or 2, I suspect we'll be selling those vehicles off and could be more or less back to normal in terms of assignment volume and sale volume in about 6 months. I'm excited about some of the new changes we've made in our senior management team.
You heard John this morning. John has a 2 decade plus experience in the automotive industry, working in automotive companies. And so I'm very excited to have him on our team. I know he's excited about our future and to be part of Copart, and we're excited to have him in our leadership team as CFO of Copart. Said this before, our people and our systems have never been stronger.
And as you know, we don't think about Copart in a quarter or in the next year, we think about it in the next 5 to 10 years. And I'm excited about the team that we have upgraded and built in the last 6 months. Our CFO, our Chief Marketing Officer, our COO and Jeff leading the team, I feel very good about our executive leadership team and our future for the next 10 year horizon. So now for more details on the quarter, I'd like to turn it over to Jeff, our President.
Thank you, Jay. It's been just 2 short months since our last earnings call, but it sometimes feels like multiple years' worth of world events have transpired since then. First, like as Jay did, I wanted to express how proud I am of the Copart team. It's been immensely gratifying as an organization to be able to do our part to provide an essential service to the communities we work in around the world. We've taken very seriously the importance of adapting our procedures to keep our employees, members and customers safe at the same time.
The disruption and adaptation have been substantial and continuous, and we're profoundly grateful for the commitment of our people to a job well done. Our aspiration throughout the crisis has been to deliver much more than business stabilization or business as usual. We've been committed to playing offense to improving the way we do business and to investing in our long term future and we've done so. We've deployed new products and features for both internal and customer facing applications. We've enhanced ProQuote, our best in class machine learning powered price estimation tool for our insurance carrier partners.
We've grown our 1st to market digital loan payoff product. We've deployed electronic signature processes and we've updated our communications technology among many other achievements over the course of the pandemic. Under Willis, Jay and many other senior Copart leaders who predate John and me, we had the foresight to build our business as a natively digital one. We've been operating exclusively online auctions since 2003 and have therefore adapted our workflows smoothly to the pandemic. I wanted to draw out a few industry themes we've observed over the past quarter, really the past two quarters, many a continuation of the themes we talked about on the last call.
We continue to observe lower than baseline driving activity, but with a steady increase from the pandemic trough with the U. S. Generally recovering more quickly than some of our international markets. The data on miles driven is noisy depending on the source. We track many of the sources you do, Google, Apple, INRIX among others.
Most of that data indicates that still relative to pre pandemic baselines, we are seeing much less commuting traffic and retail and recreation related driving. Nonetheless, a meaningful sequential improvement from the COVID-nineteen trough. As another guidepost, we note that the U. S. Energy Information Administration has recently published data indicating that gas consumption is down plus or minus 10% versus a year ago.
We have also seen relative increases in driving activity relative to other forms of transportation, including mass transit and ride sharing where we've seen activity down some 50%. As for the other important drivers of our business, accident frequency, conventional wisdom has held that accident frequency is positively correlated with miles driven because congestion contributes to accident frequency. During the pandemic, we continue to see evidence that in some scenarios anyway, the opposite is true. 1, industry sources indicated substantial double digit increases in speeding, phone usage and hard braking with our roads less crowded, speeding and distracted driving have both increased contributing to increased accident frequency per miles driven. And then of course on total loss frequency and accident severity, which we have emphasized as the most important long term driver of our business.
The long term trend of rising total loss frequency has very much continued during the pandemic. There are some indications that it may have accelerated during the pandemic in part due to the high returns we are generating at auction. Global unit sales decrease of 13% for the quarter with a U. S. Unit decrease of 13% and an international unit decline of 11%.
The unit decline of course has been driven by the COVID-nineteen impact on miles driven and therefore the absolute number of accidents and total vehicles. Our non insurance business within that non insurance business, charities and wholesalers have been the most significantly affected by COVID-nineteen. Excluding those two categories, our non insurance volume has grown year over year, including those two categories, we were down 11%. Within that non insurance group, our dealer business in particular was up 11% in units sold year over year, compared to what we believe were significant declines for other whole car auction platforms for dealers, a continuing validation of our business model. Our global inventory decreased 3.6% versus a year ago that is comprised of a U.
S. Inventory decline of 3.3% year over year and an international inventory decline of 5.3%. Turning then to selling prices for vehicles at our auctions. Despite some natural headwinds and the economic disruption of the pandemic crisis, we've experienced ASPs for our vehicles at all time highs, a reflection both of market dynamics as well as our own member recruitment and retention efforts. ASPs worldwide grew 37.3 percent year over year for the quarter with USA ASPs up 39 percent.
Used car prices have no doubt helped to contribute to that high ASP environment for us. They are however only up 15% or thereabouts year over year based on some of the industry indices we track. With our selling prices meaningfully exceeding the used car price environment. We believe that's a reflection in part of our marketing efforts and member recruitment. Turning in to the last theme.
We've closed out an unusually busy hurricane season, and we are very proud of our CAT teams. As always, we stand ready to respond to catastrophic events with land, equipment and people that are second to none in the industry. This year was in some respects the most active Atlantic storm season on record with 30 named storms and 13 hurricanes. The property damage effect, however, was less severe than we've experienced in prior seasons, but we're nonetheless grateful for the Copart Cat team their multiple mobilizations in support of our customers and communities this season. Before I hand it off to John to walk through our financial highlights, it certainly feels like one of the most tumultuous windows in my own career with no doubt still more uncertainty and change ahead.
Our experience so far in 2020 has given us great conviction that we're ready for anything. Just a few days short of Thanksgiving, are grateful for our people, grateful for our customers who empower us to continue investing in their long term prosperity in our own. And with that, I'll turn it over to our new CFO, John North to walk through the Q1 financial results.
Great. Thanks, Jeff. First, I just want to say thanks to Jay for the warm welcome and to just reiterate how happy I am to be at Copart. Obviously, a phenomenal organization and team and I am sure proud to be here. With that said, I'll make a few brief comments on our operational results, provide more color around the earlier remarks and then we'll open it up for some questions.
Global revenue increased $38,500,000 or 6.9 percent, including a $2,500,000 benefit due to currency. Global service revenue increased $27,500,000 or 5.6 percent, a more accurate reflection of the underlying activity in our business and primarily due to higher ASPs. The U. S. Business grew 4.5% and international experienced an increase of 14.2%.
Purchased vehicle sales increased $11,000,000 or 16.5% as growth in the U. S. Was partially offset by international declines, primarily driven by COVID-nineteen volume impact in a UK customer shift to a fee based sales contract. Purchased vehicle profits is defined as vehicle sales less cost of vehicle sales increased by $5,400,000 as modest volume declines were more than offset by higher ASPs. Gross profit increased by $41,900,000 or 16.4 percent and our gross margin rate improved by approximately 400 basis points to 50.1%.
US margin improved from 49.2 percent to 52.6 percent predominantly due to increased ASPs partially offset by negative yard operating leverage due to reduced cost absorption across fewer vehicles sold. International margins increased from 29.5% to 37%, driven primarily by rising ASPs, but similar to the U. S. Was affected by higher cost per unit processed. I'll now move to a discussion of G and A expenditures excluding stock compensation and depreciation expenses.
In general, G and A expenditures will fluctuate and grow over time, but we continue to believe we can achieve additional operating leverage over the long term. As with all trended data in our business, gross margins, G and A, unit sales and inventory changes, We encourage you to review longer dated trend lines rather than a single quarter metric for a more accurate view of the business, particularly given the recent COVID impact. With that said, our G and A costs were down slightly, a decrease of $800,000 from $43,300,000 a year ago to $42,500,000 in 2021. As a result, our GAAP operating income increased by 21% from $205,400,000 to 248,600,000 dollars We delivered approximately 500 basis points of operating margin improvement due to revenue growth from strong ASPs, partially offset by negative operating leverage from a lower absolute volume of vehicles. Net interest expense increased $1,000,000 or 25 percent year over year due to reduced interest income on collected cash balances given the current interest rate environment and an increase in debt issuance costs and unused line of credit fees due to the July 2020 revolver upsizing an amendment.
UN income tax expense was $46,500,000 dollars at an 18.9 percent effective tax rate, reflecting an $11,800,000 tax benefit on the exercise of employee stock options, which has been adjusted out for purposes of the non GAAP earnings included on our earnings release. On a non GAAP basis, our effective tax rate would have been 23.7%. In summary, GAAP net income decreased 8.2 percent from $218,200,000 last year to $200,300,000 this year due to a prior year tax rate reduction for stock option exercises. Adjusted to remove these items, non GAAP net income increased 21.2% from $155,400,000 last year to $188,300,000 in the Q1 of 2021. Now to briefly update our liquidity and cash flow highlights.
As of October 31, 2020, we had $1,600,000,000 of liquidity, comprised of $605,700,000 in cash and cash equivalents, an increase of $424,600,000 over October 31, 2019 and $1,050,000,000 capacity on our revolving credit facility, which is undrawn. Operating cash flow for the quarter increased $46,100,000 year over year to $258,500,000 primarily driven by working capital benefits. Sequentially, operating cash flow decreased $8,400,000 from the Q4 of 2020 as assignments have ramped back up consuming working capital and due to income tax effects.
We invested
$147,100,000 in capital expenditures in the quarter and over 90% of this amount was attributable to capacity expansion and lease buyouts. In conclusion, our conservative capitalization and strong cash flow enable us continue to make decisions for the long term interest of both our customers and our shareholders. That concludes our remarks. We're happy to take some questions. Diego?
Thank you. At this time, we will conduct our question and answer session. Our first question comes from Bob Labick with CJS Securities. Please state your question.
Good morning. Hi, Bob.
Hi. Good morning.
So obviously another terrific quarter and it looks like maybe both ASPs and volumes were up sequentially from the July quarter, but ASPs rose faster and I say this because service revenue grew faster than yard costs. And so I'm trying to understand the dynamic here between ASPs and supply and demand and see what other factors may be at play. And so do you think there's been an increase in demand from the pandemic as you brought in new people, new buyers, etcetera, so that demand could even continue to outstrip supply even when volumes do return to pre pandemic levels? Or how do you see kind of ASPs faring as volumes recover, I guess is the question?
Yes. It's a very fair and certain complex answer complex question and answer. I think, in short, the prices are high and it is assuredly not just supply and demand. And I say that with some conviction, Bob, because if volumes are down 13%, but ASPs are up 37%. And there are literally many, many, many more actual dollars purchasing cars at Copart, right?
So on fewer units, we're seeing more absolute dollars. So I think that leads me to conclude that at least in part, we are continuing to grow the demand base for the vehicles. You may recall, we had grown, expanded our marketing efforts. We hired a new SVP of marketing. We'd opened new lounges.
So that's been an ongoing multiple decades theme, frankly, Bob, but that's certainly borne fruit in the pandemic and we will continue to invest in that going forward. So how much of today's ASP increase is a function of supply and demand is hard to say. I'm sure it's part of it, but it's certainly not all of it. I think equally important perhaps is the growth of the buyer base and also frankly a total loss frequency. Those are interrelated as well and if total loss frequency increases and more and more marginal totals are totaled.
Those of course further drive ASPs upwards. They further recruit new buyers because those cars are closer to immediately drivable. So there certainly is a favorable virtuous flywheel effect, which we think is we are seeing in the pandemic as well.
Got it. That's helpful. Great. Thank you. And then, a question on international.
Didn't talk too much about it yet on the call. How has COVID impacted your plans? I think in the past you talked about Germany now starting to sell on an agency basis. So maybe an update on Germany where it's going, then the overall international emerging opportunities and were they affected by COVID and how do you see those over the next 3 to 5 years?
Fair enough. So I think the short answer to your question is that the countries have very much been affected by COVID-nineteen. I think I made a brief comment in passing there that to varying degrees and in general more severely than in the U. S. Our plans and our intentions and our execution, I don't think have varied as a result of the pandemic.
So investing in Germany, which you called out specifically, continues to be a key theme for us. We continue to invest in the land and the technology and the people, And we are selling cars, as you noted, on an agency basis for carriers in Germany today and so far demonstrating excellent results in doing so. The growth path then remains the same with all of the opportunities and challenges you've heard us talk about on prior calls, right, including changing the way the industry manages the total loss process in general to the benefit of both the insurance carriers and the policyholders. So that, of course, is a much longer discussion, but no, our perspective on it certainly hasn't changed.
Okay, great. And last one for me. Just a congratulations to John and the other new hires. So, Jeff, for you and maybe Jay, but how do your roles change now with the new hires and the kind of expanded executive team?
I think the I'd say senior leadership approach at Copart has always been quite fluid, So I think the walls at Copart between functions and countries are quite a bit lower than what you would generally observe in public companies of our size and stature. So I think it's fluid, but certainly John will take on much more of the day to day leadership of what are traditionally considered finance and accounting functions, including accounting, including Investor Relations and so forth, but also help to help us navigate the strategic future for Copart in evaluating return on investments and our approach to evaluating ROIC for the various initiatives we undertake. Our new S and P of marketing, Scott Brooker, comes from the online travel industry, which I'm sure you well know is one of the more challenging competitive and difficult arenas when it comes to the online marketplace universe. And so he will spearhead our efforts in continuing to grow that buyer base and continuing to build the demand for the supply that we bring to market. So I think day to day, it's hard to answer because no individual day looks like the other, but I think they will certainly take very meaningful leadership roles in their specific functions.
Super. All right. Thanks so much.
Thanks, Bob.
Our next question comes from Stephanie Benjamin with Truist Securities. Please state your question.
Hi, and good afternoon, everybody.
Hi, Stephanie.
I wanted to touch a bit on the non insurance side of your business. It saw a pretty strong growth, particularly the dealer side as well as excluding some of that charity wholesale business you called out, Jeff. Really interesting, I think it made sense just given your digital platform for the strong outperformance we saw last quarter, but clearly that continued into this quarter despite some of the other traditional non insurance auction providers opening up more so. So maybe you could speak a little bit about what you're seeing in that segment, if there have been some share gains or opportunity where it's actually sticky, pretty sticky and these gains kind of continue going forward and really wasn't just pandemic driven? Any color there would be helpful.
Thanks.
Yes, I think it's a fair question, Stephanie. I think if you go back and you've been following this for years now, but track the individual quarter by quarter trends for Copart dealer services. I think you'd see this growth trajectory long predated the pandemic by many years. So it's a business we've steadily grown over the years and we've grown it today in the pandemic, while other wholesale auction platforms we think have not grown nearly to the same extent and in many cases may have shrunk. That's largely a product of auction returns.
What we generate for our sellers at auction is ultimately what matters. I'm sure we are I'd like to think we're very likable people and charming, but ultimately the dealers' key priority is achieving an excellent return and doing so quickly. And the liquidity of our online marketplace, I think, is what's distinguished us. We haven't had to adapt real time. We haven't had to invent a purely digital auction after having become accustomed to physical auctions instead.
So I think there is something about being natively digital, which perhaps has helped to enhance our relative performance during the pandemic. But more broadly, that is an important profit driver for us, important long term revenue growth driver for us as well. And we are achieving good returns for our dealers and aspire to do more and better still.
Got it. And I was wondering to touch a little bit on the international Germany and some of the efforts there. Has there been any kind of internal plans or investments to expand even further internationally, so maybe in some other new markets?
In short, yes. I think Germany and Spain where we have a footprint as well have always been viewed as the gateway to Western Europe more broadly. Western Europe shares many of the characteristics, many of the macroeconomic and social characteristics that make total loss such a compelling economic proposition in the U. S. And Canada and the U.
K. And elsewhere. And that is a high repair cost, high regulatory burdens and so forth and good cars that have intrinsic value both in those native markets and elsewhere in emerging markets where demand for cars and repairable drivable cars and mobility continues to expand over time as well. So Western Europe certainly is it's our expectation that our success in Germany and Spain will eventually extend elsewhere there. Now there are other international markets long term that certainly will emerge as priorities for us as well.
But I'd say for the relevant X year horizon, our emphasis is on our core markets where we already do business today, Germany and Spain and Western Europe.
Thank you so much.
Thanks, Devin.
Thank you. Our next question comes from Craig Kennison with Baird. Please state your question.
Hey, good morning. Thanks for taking my questions. Wanted to start with government lockdown scenarios. I know the government in various geographies are considering different lockdown options here. And I'm just wondering if you see geographies that are more at risk or if you're approaching the spike in cases we've seen across the globe in a different manner now that you have learned what you have through the early portion of the pandemic?
Hey, Craig. A good question and one I am not sure we have a more enlightened perspective than you do, right. So it's a function of both of the virus trends themselves and then the expected government and social response to them. And I think we now have 6 months of experience, all of us do, in understanding how 8 months, understanding how that unfolds. So we are prepared for really any scenario, including very extreme lockdowns.
I'd argue that the April, May, June timeframe was among the more severe windows. And we could adapt we're able to adapt our operations, able to prove that our operations are an essential service to the communities we do business in. So I expect to continue to be able to serve our customers and our communities. The volume effects, I think, remain to be seen. I think it's fair to say we don't know.
And my second question is more to do just big picture with your relationships with your insurance consignors. We know that you have some exclusive relationships where your insurance partner consigns 100% of their volume to Copart. You have others where you get a fraction of that volume. I guess I can see how an insurer might want to have more than one vendor for that service, but what would be the benefits for an insurer that commits to an exclusive agreement with Copart? Is it cost?
Is there data that is unique when you have an exclusive relationship? Is there priority access? I'm just curious why you're able to win those exclusive deals?
I think the exclusive deals are reflection of a strong relationship with those customers. It's not per se that we have American Airlines Platinum status with warm nuts at the front of the plane per se. It's more just a reflection of the excellent returns we generate and the excellent service we provide to them. So there is no secret ring per se, Craig. But we work like hell to earn that trust from our customers.
We earn it in the day to day in the pickup and towing of vehicles and the auction management, the returns we generate and the title work we do for them. And certainly, we work like hell in catastrophic events to make sure that we are the most responsive that we have the most people and process and technology on the ground to serve them at those critical moments. So those exclusive agreements are a badge of honor for us that we work like hell to earn. And for the carriers, the benefit to them is that they get the Copart experience end to end. It certainly does reduce the complexity for them in not having to manage as many providers across their own platforms.
And so there is one counterparty with whom to integrate technologically. There is one counterparty with whom to discuss inventory trends in XYZ markets or processing older dated units and so forth. So the simplicity, I think, is worthwhile for many carriers as well. But in general, think it's a reflection of good service and good returns.
Great. Thanks. And Jay, if you figure out Wall Street, please let me know.
I do,
Craig. Yes. I love it when you knock the cover off the ball and the market moves the opposite direction you think it's going to move. So it's something I've yet to figure out. I'll let you know.
Thanks. Thank you, Craig.
Our next question comes from Bret Jordan with Jefferies. Please state your question.
Hey, good morning guys.
Good morning.
Good morning.
On the dealer volumes, that growth against the declining backdrop, I guess, is there an explanation? I mean, are there more cars that you're selling in the non insurance that are going to export? Are you getting a higher bid in North Africa or Eastern Europe and that's driving incremental units to you? And I guess when you think about across the board units, you have a feeling for the direction of how many cars go to export now? Are you exporting more of your volumes than you were maybe a year ago?
Yes. So the answer to your the first part of your question is yes. A meaningful portion of those cars we auction on behalf of our dealers are ultimately exported. And it's therefore that more expansive buyer universe with access to cars that help drive the differential returns. The more precise question you asked afterwards about whether the international buyer mix is higher year over year, over that time horizon, it's harder to say.
And I think it's probably flat. It may even be down slightly in part because the currencies of the relevant buyer countries for us have been weakened in the pandemic. Currencies, if you've been tracking throughout, there's been a lot of noise. Some currencies have appreciated a lot versus the dollar and others have depreciated a lot for the buying countries, their currencies have generally weakened. So they're actually paying way, way more in their own local currencies and our international demand in absolute terms then has grown, but their relative purchasing advantage is more near term impaired.
So over the kind of time horizon you're describing, it's closer to breakeven in terms of the volume changes year over year, but certainly over a 10 20 year horizon, the international buyer is much more important today than it was 10 years ago and will be much more important in 10 years than they are today.
Okay, great. And then a question on Catastrophic. You talked about multiple mobilizations, but limited property damage. Was catastrophic a negative in the quarter in the sense that you had the cost of showing up to storms, but not enough volume created by them?
It is, but not enough to call out and in part because I think we've seen enough seasons to know that there's always going to be some noise in it and trying to adjust for I don't see a whole lot of value in trying to report no storm EBITDA, right, because I'm not sure there are no storm operating profit. I'm not sure there's any scenario in which there are no storms whatsoever. So suffice it to say that when there are very severe events like Hurricane Harvey, they cause a meaningful net effect on our P and L. You'll hear us describe it, but we generally try to accept as good and bad the noise that comes in the business and this year's storm activity I would characterize as such. Okay, great.
Thank you. Thanks, Brett.
Thank you. Our next question comes from Ryan Brinkman with JPMorgan. Please state your question.
Hi, congrats on another strong quarter. Thanks Which is about the 2nd straight quarter of this 26% or 27% year over year growth in average selling prices. Firstly, are these record price increases? I cannot recall them previously growing this fast. And then also, can you just talk about the biggest factors that are driving the increase and maybe rate to sustainability or outlook for those different factors, such as whole car prices, maybe metals or maybe precious metals, I don't know?
And what has also been the impact of mix such as, for example, if you're selling these newer, higher quality or more drivable vehicles, do you think we could see these types of increases for another quarter or 2 before you start to lap the difficult compares? Or maybe should we think about some sort of moderation beforehand on whole car prices or something like that? Thanks.
Got it. First, just a clarifying point to make sure I didn't misspeak. But our I think our ASPs last quarter were up 26% year over year and this quarter we're up 37%. So the increase is more meaningful this quarter than it was last Yes, we are at all time highs and yes, I believe these are all time year over year changes as well in selling prices. You may have been away for a moment.
We did comment a little earlier on the selling price trends in the business and what portion of it is durable and not. And I think there's likely some supply and demand characteristics here. But overall, when we have seen volumes decline 13%, but average selling prices increased 37%, we conclude that the absolute dollars flowing through Cobalt auctions are meaningfully up year over year. So it's not just supply and demand, it's not just a fixed number of dollars pursuing a certain number of units. It's much more than that.
To your question about mix, I think it is fair to say that as we've seen total loss frequency increase that that benefits us in the form of ASPs because marginal totals generally generate higher selling prices at auction. I would note that that's also been a multiple year trend. Total loss frequency in 1980 was 4%. Today, it's probably north of 20%. So it's not something that happened during the pandemic per se, but it arguably has accelerated to some extent during the pandemic, but it's been a true phenomenon for many years, which is one reason why until if memory serves until the Q3 of 2020, which was right when the pandemic hits, Until then, we'd experienced ASP increases for 13 straight quarters or thereabouts and that is a reflection of our marketing efforts, buyer recruitment, total loss frequency and the like.
So, some of so, no doubt, some portion of the there are secular drivers then that will lead ASPs up over the very long haul. To what extent today's 37% increase is purely a pandemic related phenomenon, very difficult to say. It's certainly not all of it.
Okay, thanks. And then just last question is, if you could weigh in on sort of the whole inflation versus deflation debate that's taking place may come in. We are seeing a lot of inflation in used car prices, but there's deflation in other areas like commercial real estate, etcetera. I was just thinking that if one was of the view that there is going to be materially higher inflation over the long run because of what's happening with the money supply and Federal Reserve or whatnot, you own all of your land, so that appreciates in value, you won't face higher rent prices. And if you get compensated as a percentage of transaction prices, how is the company positioned to benefit or not from inflation and is that part of is that potentially part of the investment thesis here?
I'd say only indirectly so. So as you know, for example, you cited one of the more important strategic decisions we have made and continue to make, which is that owning our land is the more correct approach to navigating our balance sheet, even though on paper anyway you could arguably turbocharge return on equity by selling that land and leasing it back. We've concluded that strategic importance of controlling our own destiny, owning our land, knowing that we can assure its use for our customers for the next 50 years outweighs the leverage benefits of a potentially more balance sheet efficient approach. One byproduct of that, I think, is some inflationary protection. If we do find ourselves in an inflationary environment, we are both landlord and tenant, so we are not subject to the potential risk you described.
When it comes to inflation, in general, inflation is certainly a fraught expression and certain indices include or exclude durable goods like automobiles and real estate and the like, some exclude fuel. So it's harder to comment on in isolation. I would say, in general, inflation does not it doesn't enter our decision calculus very frequently when it comes to the strategic and operational decisions we make. So hard for me to know. I think you and Wall Street will certainly have a better perspective on this than we will, but it's not top of mind when it comes to the decisions we make.
I appreciate it. Thank you.
Thanks, Ryan.
Thank you. There are no further questions at this time. I'll turn it back to Jeff Liaw for closing remarks. Thank you.
Well, thank you for the thoughtful questions and we look forward to talking to everyone on the next call. Have a good day.
Thank you. Ladies and gentlemen, this does thank you for your participation. This does conclude today's conference. Have a great rest of your day. Thank you.