Last updated Friday, June 10, 2005

What an unusual Spring. Things are normally very active in the wholesale used car business this time of year, but this year it’s as if someone pulled the plug on the used car factory. There continues to be a serious lack of inventory available and, until very recently, that has created a strong market for most vehicles. Over the past few weeks, however, demand seems to have shrunk to the point that in spite of the lack of supply there is a softening of prices for all but the most desirable vehicles, and you can expect to see some erosion of prices to reflect that.

Hardest hit continues to be the full-size SUV segment. Such vehicles as Excursions, Denalis, Escalades, and even some of the larger imports, are dropping consistently and may even be suffering from the “I’ve got to own it well below book” syndrome that is usually reserved for the market doldrums of October, November, and December. Continuing to drop steadily as they have been for some time are the European luxury vehicles. Together with the full-size SUV group they represent an area of the market that has not suffered as much from a lack of supply as the rest. We expect that trend to continue and recommend a good deal of caution with the large SUVs in particular.

What has changed is that those vehicles that attracted multiple bidders in the recent past are often attracting one or none in the present, and prices are leveling as a result. There is not enough retail activity to create greater demand and dealers seem to have lost their will to buy simply for speculation unless it is at their price. It is not a soft market, but it does not have the strength we’ve come to expect except for the unusual vehicle, and we don’t see any reason for that to change.

Convertibles are actually holding up quite well, but that is a market that usually erodes rapidly right around now, so we advise caution there as well. The rest of the market is slipping slowly - if at all - and we expect that to be the trend for the next month or so as we expect supply in most segments to remain relatively scarce in the near future.

Dan Galves