Market Conditions February 2003

Spring isn’t here yet, but there are signs that it may not be too far away. We’ve attended a few auctions lately, and the action is brisk. Though prices are not skyrocketing, the percentage of sales appears to be way up compared to the latter part of 2002 and the number of buyers standing in the lanes must be up about three-fold. What keeps pricing from taking off is that there is still a lot of product available and retail used is still just OK as manufacturers continue to fuel new car sales with incentives. But it’s a definite improvement.

Of course convertibles and sport coupes are leading the resurgent spring market. Mustang GTs and Cobras are back in favor and Corvettes appear to be heating up. There are a significant number of Porsche, BMW, and Mercedes around and because of their volume they are taking a little longer to rebound, but we believe it’s only a matter of time. Remember, there is a lot more product available among those manufacturers – Boxsters in addition to 911s, CLKs and SLKs in addition to SLs, and Z3s in addition to the 3-series convertibles – to say nothing about the addition of the Lexus SC430, Audi TTs, Honda S2000, and Toyota MR2. I’m sure I’ve missed some and I know there are more to come. The point is, there is a lot more competition within this market segment than there was 5 or 10 years ago and a lot more product available, and we may not see the same kind of feeding frenzy for these “toys” as we have in the past.

The key to pricing continues to be availability. Product that is still out there in large numbers, particularly 1999 and 2000 models coming off favorable leases, will continue to lag behind the general market. Supply is simply overwhelming demand and those vehicles will continue to suffer. If there is not something exceptional about them in terms of mileage, color, equipment, or some combination of those factors, they will not do well. I was recently at a Ford sale and watched several Explorers. XLSs, which were the bulk of what was available, were cheap. But the occasional XLT V8 with leather and a roof, or the even scarcer Limited, still rang the bell. Good 1998 and older product with good “clocks” are relatively scarce and do well. As always, supply and demand rules the market.

But clearly things have improved, and we expect them to continue to do so.