Last updated Wednesday, January 2, 2013
2012: The Year In Review:
We look at the past year as something of a return to relative normalcy in regards to the used vehicle market and remarketing industry. No financial crisis, no major fuel price disruptions, no Japanese tsunamis, nothing terribly disruptive until tropical storm Sandy, the presidential election, and the fast approaching, so-called financial cliff. But all that is very recent and will play out in the final two months of the year. Prior to that, 2012 was pretty kind to most of us in the automobile business.
The dominating factor was a general shortage of vehicles and a relatively strong pent-up demand as consumer confidence rose, finance companies regained their composure, manufacturers ramped up cautiously, and people simply needed to replace vehicles after years of restraint. There were a couple of fuel price blips. The first one - pre-memorial day as usual - had some short term affect, but nothing drastic. The second one - early fall - had little affect as consumers seem to have gotten used to the ups and downs in that market and are paying less attention than in the past. One would think enough of them have gotten badly burned making impulsive, and often irrational, purchases in response to fuel costs. The same might be said of dealers. And of course now we are talking about the US becoming a major (perhaps the major) oil producer in the world. It wasn't long ago we were talking about a world wide oil shortage.
The generalized shortage of supply created not only a slightly stronger market in most segments but also a longer, stronger market in most segments. The "spring market" that often softens in May sustained itself through June and even into July. That left less time for the market to erode as it normally does through summer and resulted in less depreciation than normally experienced at that time of year. September was relatively gentle as well and it wasn't until October that the market made some stronger than usual adjustments as the market went into "catch-up" mode. Sandy put an abrupt end to that and we are currently looking at a market that is unusually strong for this time of year. We expect that to continue for the remainder of the year and think it will continue right through to what we expect to be another strong spring market.
Particularly strong have been price range vehicles in all segments. There has been strong demand for those under $10,000 vehicles and we think the aftermath of "Sandy" and need for replacement vehicles will only exacerbate that trend. Another segment that has shown unusual strength is the full size domestic SUV segment and pick-ups. We assume that the extreme shortage of those vehicles as a result of very weak new vehicle sales in that segment in previous years has driven that market.
We have been saying for months - sounding like a skipping record - that the one segment that has been steadily eroding and needs close watching and suggests quick turnover is the Asian and European luxury market, both cars and trucks. There is and has been a reasonable supply and tepid demand in that segment and we expect that to continue as well. We do foresee the potential, however, for a short-lived burst in that market as a result of the "Sandy" dynamic.
So for at least the first 10 months it was a pretty calm year with few disruptions and a welcome steadiness and predictability. With the caveat of a "fiscal cliff" issue, we think that 2013 will be very similar. There may be a bit more supply as a result of an improving economy throughout 2012 but we expect there to be heightened demand as consumer confidence rises, pent-up demand continues, and the economy improves. We certainly hope that is the case. We like stability and predictability versus volatility and uncertainty.
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