Market Conditions

October 3, 2003

The year 2003 has brought us the most stable and consistently good, if not great, summer market that any of us can remember. Whereas the summer doldrums typically kick in sometime in early to mid-August, this year we experienced a strong demand for product and accompanying strong prices right up until the tail end of September. It is only now, in the beginning of October, that we are beginning to see some erosion in the marketplace.

Last year the market hit its lowest point in late October, early November and rallied some in December and beyond. But at its lowest point there was some serious bloodshed. If you were in position, it was a great time to buy. From a book standpoint, it was very difficult to keep up with, even for us who have the ability and expertise to respond quickly to changing market conditions. We donít expect the same kind of drastic fluctuation to occur this year, although we do expect something of a steady deterioration of pricing for the next couple of months. Manufacturers in particular seem to have learned some lessons from recent winters and seem to be doing a better job of diminishing numbers of units, moving product around the country, and timing peak volume for what are typically better months in which to sell. We shall see.

Convertibles and sport coupes are leading the eroding market after experiencing an unusually long stable market. Mitsubishi Eclipses and Audi TTs in particular have been hard hit. There seems to be some softening of traditionally strong players such as Honda and Toyota. Some of the lesser Japanese manufacturers that have fueled their sales with strong incentives - Mazda and Mitsubishi types - are seeing the results as their lease returns suffer in the marketplace. The European manufacturers seem to be holding up somewhat better, but we think you can expect them to decline as well. American manufacturers are experiencing some difficulties as buyers will pay-up for the exceptional vehicles and largely ignore the others. You can expect ordinary vehicles or picky vehicles to become more difficult as demand seems to be slackening and price becomes their only attraction. There are simply too many ordinary or picky vehicles out there with too many miles for the market to absorb. We urge caution when appraising them. 

SUVs and pickups will probably withstand price erosion better than most products as we negotiate what is typically the most difficult market of the year.
Dan Galves