Last updated Friday, September 20, 2013

A More Steady "Fall"
We realize we will not be telling you anything you don't know when we remind our subscribers, largely professionals with established roots in the auto remarketing game, that it is not unusual for about half of a vehicles yearly depreciation to occur in the months of September through November. In fact it is pretty typical. This year, however, has been unusual in many ways due to a variety of factors that have created an unusual balance in the supply/demand ratio and smoothed out much of the volatility we have come to expect most years. The market has clearly declined and will continue to do so, but without much of the sudden and largely unpredictable depressions that are common most years. We suspect that has been a welcome respite for most after experiencing some of the dramatic market shifts that occurred as a result of the financial crisis we have been digging our way out of for the past few years.

Quality Remains King
What has been particularly challenging for most of the year has been the significant difference in the value of a very good car - good color, good miles, good equipment, good condition, good vehicle history - and its mediocre counterpart. Where there is a supply of vehicles a bit more sufficient than the demand, once the very good vehicles are spoken for the remainder of slightly lesser vehicles can be very difficult to sell. It can be confusing and confounding to see a similar but slightly lesser quality, slightly more miles, slightly less equipment, and/or slightly less desirable color do significantly less money than that other one that just did so well. A good example might be Lexus RX350s. They are plentiful and relatively popular with consumers, but the difference between a white and tan 2010 with navigation and 30,000 miles and a silver and gray one without nav and 45,000 miles will be a lot more than what one might expect in a less selective market. And, by the way, a lot more than what some of our price guide brethren might reflect. We don't see that changing in the short term.

We expect September to see a gradual decline in most market segments, not very different from what we have been experiencing these past few months. Pick-ups continue to be good. Luxury imports, both cars and trucks, are declining steadily but not dramatically. Good domestic cars remain solid. Larger domestic SUVs are slipping while mid-size and imports are holding steady. Convertibles are fading rapidly.

Late Models Difficult
Late model pre-owned of all sorts are becoming very difficult. There are some very aggressive rebates being offered as well as highly favorable leases. Toyota, for instance, just approved a 63% residual on a three year Corolla lease, hoping to jump start that launch and put a dent into some stiff competition. That will put a lot of downward pressure on 2012 and 2013 cars in that segment. And that is just one of many examples. We expect some serious erosion among 2012 and 2013 vehicles that have relatively high supply.

And it is September. Many of us remember Septembers as new vehicle introduction time, and for many manufacturers and vehicles it still is. A friend/consultant just reminded me that cars get a year older in September. That 2012 is no longer one year old, it just became two years old. Point well taken.

Dan Galves



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