Last updated Monday, July 11, 2005
One of the consequences of GM’s very successful “Employee Discount For Everyone” program is that there are more vehicles entering the used wholesale market than there have been for a long time. The substantial discounts available on most GM products have clearly had an impact on late model GM vehicles in particular, but have also impacted competing late model vehicles as buyers opted for the GM brand and lessened demand for competitive vehicles and dealers had to rethink their used vehicle retail pricing in order to sell against all the GM hoopla.
In addition, the heightened number of trades coming into the market has loosened what has been a very tight supply and demand relationship resulting in a general slackening of market strength. This is a time of year when you would normally expect some slippage anyway, but what affect the continuing of the GM program and the jumping in of Ford and Chrysler will have is unknown. We can see that what was a very good market for selective vehicles is becoming highly unpredictable. Used retail has certainly been weakened and will continue to be so by the substantial discounts and high visibility of the American manufacturers’ programs. Couple that with an unusually high number of trades and you have the makings of a weak market for all but the most desirable vehicles. Anyone trading very late model vehicles without doing some serious homework is at risk. We think we do a very good job of staying on top of such things, but caution is advisable.
What has been a very strong market, the under $10,000 vehicle, will continue to be the market leader, but even that will lose some strength as trades become more plentiful and new vehicle deals and financing begin to put pressure even on the $10,000 price point.
So far the erosion has been slow and the wholesale market has remained fairly strong. Good cars are still bringing good money. But there are signs that things could change rapidly. It is a very unpredictable market for ordinary vehicles, and it might get even more unpredictable.