Last updated Thursday, January 21, 2010

Any attempt to report on the used vehicle wholesale market at this time of year is really more a prediction than a report. The auctions have been pretty much limping at best over the recent holiday fortnight and are not necessarily an accurate reflection of reality. Having said that, I think we can make some valid predictions for the weeks ahead.

In general, we expect the market to be firm in most segments and for most model years given the lack of vehicle availability and reasonable used vehicle sales trends over the past few weeks which we expect to continue into the new year.

There are, however, some notable exceptions and areas that require caution, 2009 vehicles at the top of the list. Many late model vehicles have undergone serious price erosion recently in the wake of strong rebates and incentives as manufacturers did their annual year-end dance in an effort to close the year on a high note. Even such perennial stalwarts as Honda and Toyota cars and trucks have softened considerably in the wake of strong year end incentives. Lesser brands have followed suit and we think it will be a while before those bread-and-butter vehicles fully recover. Many potential late model used buyers have been wooed by the incentives and taken out of the market and it will take a while to build up demand to match a bloated supply that has built up as sales of those late model used vehicles went south for the past couple of months.

The European luxury segment, and Asian luxury vehicles for that matter, have gotten beaten up pretty well over the past few months and seem relatively stable for the moment. It has been the higher volume models that have suffered most - Mercedes E-class, Lexus ES and IS models, BMW 5-series, are good examples - and we think they bear watching as the month progresses, especially in those years where there is a lot of product coming into the pipeline. Convertibles also have been hard hit - BMW 3-series, Mercedes CLKs, and Lexus SC430s in particular - and we expect that they will strengthen as we move forward.

Good domestic product continues to be very rare, especially on both coasts, and they should be quite strong in the coming weeks and for the remainder of the spring months. Ditto for good pick-ups. And for good price range vehicles as well.

The key word for all those segments is good. The most difficult part of reflecting the current market - what makes our job most difficult - is the very large gap in the value of real good, right mileage vehicles and their ordinary quality, medium to high mileage brethren. The real good, right mileage vehicles, because they are in such short supply, bring more than one expects or thinks they should, and the opposite is true for their lesser quality, higher mileage counterparts. If you can sell them at all. Too often the only thing that creates demand, provokes buyer interest, is a low price.

The early reports from the first two weeks of auction sales since the holidays are that the market is good but not great. There are still a lot of no-sales and percentages sold numbers are just OK. We think that some of that is a result of a supply hangover from the lack of auction activity in the final two weeks of 2009 and whether or not we will see a return to the unusually strong demand driven sales activity that dominated the market for most of last year remains to be seen.

My personal opinion is that the overall market will be pretty good, better than what we had come to consider normal before the disaster of 2008, but not as strong as what we experienced in the bounce-back year of 2009.

Dan Galves



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