Last updated May 7, 2004
It appears that slow retail used vehicle sales are beginning to decrease demand for cars and trucks
to the degree that supply has caught up with demand and there is some slackening in what has been
a relatively strong wholesale market. We have been hearing about a lack of retail activity for
some time and were wondering when it would finally be felt in the marketplace. We are not surprised
at the general weakness of the retail used industry, what with the variety and scope of rebates and
incentives so prevalent in the ultra-competitive new vehicle market.
As you would expect, particularly vulnerable are those vehicles that are returning to the market
in large volumes, 2001 models in general and high volume SUVs in particular. We think you will
see a general slackening in their values as the trend continues and we don’t see any reason why it wouldn’t.
Late model SUVs are softening considerably as manufacturers increase incentives in an effort to spur
new SUV sales. This is particularly true for those high volume producers, domestic or foreign. Think
Ford, Jeep, Land Rover, Lincoln, Mercedes, as well as some of the Japanese and Korean manufacturers.
Gas prices are also having an effect on the market and the larger, less efficient SUVs are finding
fewer takers and, consequently, lower prices.
The same logic applies to high volume late model cars. They are driving sales with incentives
and their late model counterparts are suffering.
Convertibles and sport coupes are still holding their own, but we are skeptical of their staying
power and think we may see an earlier than usual decline in their values.
In general, these are not drastic shifts in the market but a general softening that is likely to
continue as long as used retail sales continue to lag.