Last updated Thursday, January 8, 2004

December is an unpredictable month in the wholesale used automobile industry. Some years product is quite scarce and demand reasonable and the market builds some positive momentum coming out of November, usually among the weakest months of the year. There are years when you can actually make money in December. Unless you were very lucky or very good, this past December was not one of them. This was a year when you wanted to be buying in December, not selling.

For those of you lucky enough to have had some funds and some space, December bargains should get you off to an excellent first quarter. In many cases, manufacturers had plenty of product to unload in December - supply well beyond demand - and there were bargains to be had. VW, Audi, Mercedes, Honda and Toyota were among the hardest hit of the imports, and those buyers willing to settle for less than the cream of the crop were pleasantly surprised by the prices. It is worth remembering that in most years setting yourself up to be in the buying mode in December is a good thing.

From a book standpoint, Decembers are very tricky. First of all, it is an unpredictable month. There are years, though few and far between, when the market actually has an upturn in December. Second, there is a period, usually in November and December, when buyers simply won't pay book for a vehicle even though it is of book quality and mileage. Lowering the book doesn't help, buyers still want to buy under book even though the vehicle may be well worth the book value. Finally, the November/December market is often followed by a significant upturn in the market in mid-January, an upturn that usually builds and continues well into the Spring. Lowering the value of vehicles excessively at the end of the year can result in being out of touch with the real market for a significant period of time. In short, there is a fine line between being too aggressive or not aggressive enough with book values in December.

We can say that the beginning of January has seen a significant increase in demand for vehicles and a great deal of optimism among dealers when discussing the year to come. We will be interested to see what the early auction sales look like, especially with regard to manufacturers' sales that were so weak in much of November and December. We expect that they will show a marked improvement and that the market in general will be much stronger. The question, as always, is how long will it last? We can say that really good vehicles with mileage on the low side continue to be rare and should be very strong for some time to come, and we certainly think that it will be some time before vehicle prices in general will return to the lows of the previous couple of months. We wish you all a very happy, healthy, and prosperous New Year.

Dan Galves