Last updated Monday, July 11, 2011
A Return to Normalcy
We think we are experiencing the beginnings of a "return to normalcy" as we enter the mid-summer market. What that means, in general, is a slight retreat from the inflated values in the economy car and older, price-range vehicle segments as well as increased activity in the previously largely ignored and under-valued mid and full-size SUV segments. The fact is, there are only so many buyers out there willing and able to pay inflated prices for mediocre vehicles that get increased gas mileage and eventually the bargains in the severely beaten up segments become too tempting to ignore. We think we are at that point. The degree and speed with which these shifts occur is largely dependent on the degree and speed with which the price of fuel moderates, which we expect, as we move forward.
The fact that there is still a relatively balanced supply/demand situation and that we expect that situation to continue well into the future means that we expect relative stability overall with minor exceptions gradually occurring in those segments that were most distorted, positively or negatively, by the rise in the cost of fuel. We are already seeing, for instance, some slackening in the over-inflated economy car segment and a definite increase in lane activity in the full size SUV segment. Exceptional vehicles in desirable segments are still rare and continue to do very well. We expect that to continue.
Even the European and Asian luxury market that usually gets beaten up over the course of the summer is holding up quite well thus far.
The most difficult vehicles continue to be those middle mileage, normally equipped, neutral color and condition vehicles in segments that have reasonable supply. Those that have little or nothing going for them to separate them from the pack can be particularly problematic.
The bottom line is that we think that unlike most summers that typically see a definitive drop throughout the market as we move towards fall, this summer is characterized by an unusual balance between supply & demand that we expect to result, with the exceptions noted, in a relatively stable overall summer market this year.