September 8, 2003
It has been such an unusual year with respect to the wholesale auto market that we hesitate to predict what the future holds. July and August have probably seen the most consistent and strong market we have had this year, a most unusual departure from what is usually a soft and uninspiring market period. But we are thankful and hopeful that the trend continues.
September has already seen a slight downturn in the market and we think that trend will continue, but without the drastic swings we have sometimes seen in the past. Other than those lease returns coming back into the market in large numbers there is not a lot of product available. New vehicle sales continue to be slow and good trades are scarce. It seems that what new vehicle activity there is is fueled by people who really need a fresh vehicle because their old one has seen its best days. For the most part the trades we are seeing are older and have higher mileage and the word is that these "off" vehicles are very difficult to sell and have only a low price to attract buyers.
Low mileage, good condition domestic cars are very scarce and bring a premium, but their more ordinary brethren, in terms of mileage and condition, are much more difficult to sell. Be careful of over-appraising them. Pretty much the same scenario applies to off-brand Japanese vehicles and the Korean brands. Because there is still a good deal of demand for the Toyotas and Hondas of the world, you can get a reasonable price for them even if they have a few flaws and are a bit up in mileage.
The luxury market is still quite good with the exception of high mileage product. Unless you are dealing with a popular and scarce model, full mileage deducts may be in order.
For some strange reason - probably relative scarcity and the lack of a really strong spring market - convertibles are holding their own and are much more stable than one would expect for this time of year. We would be very careful of speculating with them, however, for when they soften it may be quite severe.
Last year saw the market bottom out from the middle of October to the middle of November. There were some great buys to be had during that period. It might be time to start getting lean in inventory so as to avoid selling during that period and in order to be in position to take advantage of some of those diminished prices.