Market Conditions November 2004


Not unusual for this time of year, we seem to be at or approaching the bottom of the market. It is that time of year that everybody wants to buy everything for “under book”, no matter how much of an adjustment the book has already made to reflect reality. It is a difficult time for those of us responsible for crunching numbers as we try to reflect a market that is not really based on anything other than a desire on the part of buyers to exercise caution - caution being represented by some amount below “book” that makes the buyer feel comfortable. “Well, it’s got to be worth that,” is the prevalent mind-set driving such a market.

The reality is it’s a good time to buy if you’re not anxious and a bad time to sell if you are.  I’ve told this story before, but just about a year ago as I was at an auction observing among other things a VW/Audi sale and left the proud owner of 11 VWs. I had no intention of buying anything, but the prices were so depressed it was irresistible. I have not yet had the same opportunity to observe a similar sale this year, but our consultants tell us that similar conditions are occurring this year as well.

 While the books may continue to drop moderately over the next two months, we feel that most of the realistic depreciation of vehicles has already been reflected and that trying to chase the “under the book no matter what” market is a losing battle that serves no purpose - a dog chasing its tail. Keep in mind, however, that for the next month or so, selling vehicles for over book will be very difficult unless you have a very unusual example. Fortunately, December often brings some life to the market as vehicles become ultra-scarce and dealers begin to restock inventory.

Dan Galves