Last updated Friday, October 1, 2010

Demand Increasing
I indicated in my last market conditions report that I thought September market conditions would follow a general decline that we were experiencing during the month of August and that the market, though robust for unusually desirable vehicles, was actually quite thin and unpredictable once you got past those exceptions. What I've seen since, however, is a strengthening market in most segments and much higher demand for the run-of-the-mill vehicles that make up the bulk of the vehicles available for purchase. My assumption is that August demand was severely depressed as summer wound down and vacations and back to school preparations took precedence over vehicle concerns among the general population. Supply continued to be low in most segments so the decline was slow but steady throughout most of the market. Supply continues to be low as we move through September, especially of good condition, right mileage vehicles, and demand seems to have perked up. Hence the general strength we are experiencing at a time of year we typically see the opposite. So most market segments are seeing an increase in activity in the lanes even among the more mundane and ordinary vehicles relatively ignored for much of the year. Exceptional vehicles continue to be scarce and bring exceptional prices as expected. The surprise factor is that their more ordinary counterparts are also doing quite well.

Late-Model and Luxury Units Down
Late model vehicles can be exceptions to the overall strength of the market, particularly where there are strong incentives or aggressive lease deals being offered. 2009 Hyundai Genesis 4 doors, for example, seem to have recently dropped significantly, perhaps as a response to the aggressive $399/month lease being advertised seemingly every other commercial on TV. On the other hand, where there is a lack of new vehicle supply and few program vehicles available there can be a strong market for certain late model vehicles.

I know this must seem like a broken record by now (do they make records anymore?), but the one segment that continues to be weak, and in some cases extremely so, is the import luxury market. In particular the high end of that market is eroding quickly. Vehicles like Mercedes S550s, BMW 7-series, Jaguar XJs, and Lexus LSs are very difficult to handle successfully in this market. Most convertibles and sport coupes are suffering a similar fate. There is a reasonable supply and little demand for vehicles such as BMW 3-series convertibles, Z4s, Audi cabs, Mercedes CLKs, Volvo C70s, and they have softened considerably of late.

Price range vehicles of all sorts continue to be strong, especially if they are healthy examples. Condition in this segment is the major factor and even high mileage offerings do quite well. Low mileage really good ones can be off the charts.

Most other segments are pretty good right now. Pick-ups, SUVs, compacts, mini-vans, mid-size cars, full size cars: all good if of reasonable quality.

Normally we would be forecasting a strong decline in October, but we're not so sure this year. We expect the short supply in most segments to continue and the demand to hold up, so we expect the market to remain relatively strong for the next few weeks at least.

Dan Galves