Last updated Monday, January 14, 2008

It is a little early to comment on the market conditions at this point in the new year, but the weakness that has been displayed thus far begs at least a mention. Mid-December usually brings something of a turnaround from the typically weak market of the holiday season. That has not happened yet and we have some doubts that if and when it does happen it will be anything more than a luke warm adjustment. Thus far there are simply too many vehicles in most market segments. Coupled with a generally weak demand and a retail public confused by the economy, fuel prices, and presidential politics, most dealers are reluctant to take a strong position and compete vigorously for all but the most desirable vehicles. There is little that cannot be replaced in subsequent weeks and therefore little need to speculate. We don't see much reason for that to change in the short term.

Most years we try not to make a lot of changes in the book in December because we know that the market usually bounces back at that time and into the new year. This year that was not the case and the market continued its downward spiral through December and seems to be continuing on that path. Pick-ups, large SUVs, and luxury cars have all experienced an unusual amount of downward pressure the last couple of weeks. Convertibles have not yet caught fire. There are, on the other hand, few good vehicles in that popular under $10,000 price range and that is a rare market segment that is relatively healthy.

Again, the next few weeks should go a long way toward determining what the future holds and we are certainly hoping for some positive momentum, but we did not want to let this current level of untimely weakness go without commenting. We will report back in a few weeks when we have more evidence one way or the other.

Dan Galves