Last updated Wednesday, August 1, 2007

In a normal year the months of July and August usually see a fairly steep decline in wholesale automobile values pretty much among all segments of the market. There tends to be very little demand for vehicles as people go about the business of vacationing, spending time with their families, and generally enjoying the climate in lieu of thinking about transportation. Although used vehicle supplies tend to dry up as well, it is not usually at the pace of the demand falloff largely because manufacturers create some artificial new vehicle sales and a consequential supply of trade-ins through the use of incentives. This year that has not happened, probably because manufacturers are trying their best to wean the buying public off of its incentive addiction. So although demand is very low, so is supply and the market continues to decline but in a slow and steady manner.

Good cars continue to be extremely scarce and therefore are very strong. Lesser vehicles in terms of mileage, condition, desirability, and equipment have essentially no determined buyers and are very difficult to sell with price (a low price) being the only motivating factor, never a good situation for the seller.

Of course sport coupes and convertibles are pretty much afterthoughts this time of year and are falling faster than the rest of the market segments. Gas guzzling full and mid-size SUVs have already experienced substantial erosion and continue to fall at a moderate pace. Smaller SUVs have held quite steady as a 4x alternative for many buyers. Domestic cars are very scarce, are regaining some of their lost reputation for quality, are becoming recognized as good buys in practical transportation by the public and are holding up well as a market segment. Imported medium price cars are relatively abundant and though declining substantially over the past few months seem to have regained some of their strength recently. Not so for the European luxury segment which are more abundant than demand merits and except for the exceptional ones are experiencing significant price erosion.

We expect August to be similar to July with supply and demand generally low and the market falling some, but slowly and steadily.

Dan Galves