Last updated Tuesday, May 10, 2011

Market Strong & Stable
The market continues to be strong and stable in all segments except those negatively affected by escalating fuel prices. Econo-cars are at the high end of the spectrum and full size SUVs and pickups populate the low end. There is still a scarcity of product in general and a healthy demand, thus the overall strength of the market as we head through May.

Japanese vehicles in particular are inordinately strong as those franchised dealers anticipate a shortage of new vehicles for months to come and fight for late model used product with which to sustain a reasonable level of sales. We have mentioned that the Toyota Prius is the poster child for such frenzied buying and that continues to be the case. If you were fortunate enough to have bought, for instance, a 2009 Prius in December and somehow managed not to sell it over the intervening months, you would be looking at a wholesale profit in the area of $4,000. Enterprise franchisees are smiling mightily these days. Though not to the same extent, the rest of the late model econo-vehicle segment is prospering as well.

The more fuel efficient models among the luxury segment are doing quite well also and have been rising in value in recent weeks. That would include such vehicles as BMW 3-series, Mercedes C-class, and Lexus ES and IS models. Convertibles in these segments have performed unusually well also. Had you bought an '08 BMW Z4 convertible in late 2010 and somehow managed not to sell it, you would be looking at a similar happy circumstance as the aforementioned lucky Prius owner.

Imported Luxury Cars & SUV's Worth Watching
Higher level Japanese and European luxury cars are relatively stable for the moment, but we think they could begin to erode steadily as we move into summer. The higher level SUV segment among this group bears watching as well as some appear to have already begun to decline. Those with the highest level of supply (primarily lease terminations) are the most vulnerable.

Domestic SUV's & Pickups Weak
The weakest segments continue to be domestic SUVs and pick-ups. Dealers are reluctant to pursue gas-guzzlers even though their pricing makes them tempting. It's not a good thing when demand is driven primarily by favorable pricing.

We don't expect things to change much among those segments that are currently doing well although we don't think there is much room for improvement either. How high can a Prius get before it bumps into the new model or competitive products? What happens among the less desirable offerings remains to be seen, but we would not be surprised to see further erosion before they become more saleable.

Dan Galves