Last updated Friday, December 15, 2010

A Relatively Stable Year With Prices Rebounding
As years go, 2010 was a relatively stable one, especially when one compares it to the recent past. 2008 will largely be remembered for the spike in fuel prices that created havoc with the gas guzzling market segments such as full size SUVs & pick-ups and full size cars. That was closely followed by a more generalized 'market malaise' resulting from the near collapse of the banking system. 2009 brought a general recovery, relatively speaking, as most vehicle segments returned to some degree of normalcy fueled by a severe lack of supply and a bit of a 'feeding frenzy.' Retail buyers who had resisted the buying urge for as long as they could slowly re-entered a market severely depleted of good quality vehicles in most segments. For much of the year, and in many segments, prices rebounded from the depressed market of the previous year.

2010 has been, in comparison, a much more typical year for used vehicles. A continuing shortage of vehicles - especially good, right mileage ones - has brought something of a return to normalcy and predictability. That means that the spring market was relatively strong in most segments and had legs as well. Although demand was just so-so, supply was very light in many segments. Good vehicles were scarce just about everywhere and did well. Exceptional vehicles were exceptionally rare and brought exceptional prices. At a recent auction I watched an incredulous dealer who thought his final bid was pretty incredible ($11,700 plus fees for a 2001 BMW 330CIC with 36K) shout in disbelief as the car was no-saled on the block (he ended up paying $12,000 plus fees). I was also at Manheim on the first Friday sale after the Thanksgiving hiatus and witness to a sale of the sort of strength and activity I'm doubtful has ever occurred in December at Manheimís flagship auction and perhaps anywhere else as well. The consensus is that the strength is more the result of scarcity of acceptable product rather than strong retail demand.

Higher Mileage Vehicles More Acceptable
As often occurs when vehicles are generally scarce, mileage parameters get stretched and dealers will accept and pay more for vehicles with higher mileage than they would normally accept. That has certainly been the case this year and will probably continue as long as vehicles remain scarce. Our mileage standards are meant to reflect the mileage at which vehicle segments begin to move from acceptable for the same-make franchised dealers (which are most often the strongest buyers for those vehicles) into second tier buyers who are not quite as demanding. A conversation we will be having as we move forward will be the possible stretching of our own mileage standards to better reflect buyer tendencies as they have evolved in response to diminished availability.

Equipment Matters
In many cases, equipment levels have become increasingly influential in used vehicle values. Among some vehicles, the absence of such options as navigation, moon roof and leather can make vehicles almost un-saleable. Whereas scarcity of product has made dealers more tolerant of higher mileage, such does not seem to be the case for equipment missing among vehicles where it is clearly expected. A Lexus LS460 without navigation, for example, would be a considerable marketing challenge.

Luxury Vehicles Steadily Decline
The one segment that did erode steadily throughout the year - sometimes even precipitously - was the luxury segment, particularly cars and, most particularly, the more expensive models. That seems to be primarily due to the fact that those vehicles returned to the market in comparatively greater volume and had comparatively lesser demand than most.

All-in-all, it was a pretty good year if you were not addicted to excitement; relatively consistent and predictable, a far cry from the previous two years.

As always, we are extremely grateful for your continued support and we wish you a very special holiday season and a pleasant and fruitful New Year.

Dan Galves