Last updated Monday, August 12, 2013

Stronger Than Normal Demand
We thought we would experience relatively mild declines in the market this summer, and thus far that seems to be the case. Weakening retail demand is generally what causes the summer market to recede. Most summers consumers simply have other things on their mind: kids at home, vacations, recreation, gardening, entertaining, visiting, and so forth. For a variety of reasons this summer seems to be a bit different and retail activity is stronger than usual. We think there is still quite a bit of pent-up demand among those many of us who have put off major purchases as we deal with an economy that has been slowly recovering from a severe recession. Buyers are becoming a little more comfortable with what appears to be a more stable economy. Many 401-Ks have recovered. Housing has turned a corner in most parts of the country. People are generally more optimistic about the future. For all those reasons and more we think demand for used vehicles is stronger than normal this summer and that declines are generally more gentle than we have come to expect this time of year.

Under $10K Vehicles Still Hot
Older price range vehicles continue to be the strongest segment. There is a seemingly insatiable demand for quality transportation that can be bought for under $10,000. We have been saying for a while that there are no bad vehicles being built any more as manufacturers have had to get their acts together simply to survive. Apparently that sense is now prevalent among many consumers as well and they are very willing to purchase vehicles that are older and with higher miles than was previously acceptable.

The other end of the market - very late model and higher priced vehicles - is the segment that needs to be most carefully monitored. Demand is still tepid among those vehicles and declines are more likely to reflect a typical summer market.

Trucks Relatively Strong
Pick-ups and full size SUVs continue to be relatively strong. There is reasonable demand and not a lot of product due to recent years of slow new vehicle sales among those segments. Smaller pickups and compact SUVs are holding their own as well. Even convertibles and sporty coupes, often unsellable this time of year, are doing relatively well. Seems some of us are giving ourselves permission to buy "toys" again.

We continue to make the point that among much of what we consider mainstream vehicles in the mid-and-upper price ranges there is a significant difference between average vehicles and exceptional ones. There are often simply too many of them for the market to absorb, and once you get past the few exceptional ones there is a severe drop off for the remainder and many of them don't get sold.

We think August will be much the same. We consider September and beyond to be highly unpredictable at this point. Dan Galves



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