Market Conditions September 2004

A variety of factors are contributing to a market that is in a general, and fairly steep, downward trend. First is the fact that the months of June and July saw an unusually strong and stable market for that time of year. It was inevitable that there would be a downturn, and when it came it was relatively sudden and rapid. Year-end unloading of current year new vehicles at bargain basement prices to make room for the '05s is also exerting downward pressure, especially on late model vehicles. The persistent lack of demand has finally caught up with the shortage of vehicles and is a contributing factor. Finally, it is September, and we are experiencing the usual seasonal adjustment. I think we will experience much of the same throughout September and October.

Hardest hit so far have been the higher-end sport utilities and luxury cars. Gasoline has been a major factor in the weakening of the SUV's while the luxury segment seems to have been victimized by a steady supply coming into a market that has very little demand. Many buyers who might have been looking at pre-owned have been tempted by the heavy rebates and incentives being offered on many 2004 models. There have been some severe reductions in these vehicles, especially among Mercedes, BMW, and Volvo, over the past couple of books. That trend seems to be slowing down for the moment.

Sport coupes and convertibles continue to decline. Hardest hit have been Corvettes and Jaguar XK8s, but all the other brands have suffered as well. We expect that to continue in the near future.

Ditto for Vans. They have experienced something of a general downturn lately, although not as severe as some of the other categories. Even pickups, often seemingly immune to market trends, are following suit and dropping slowly but steadily.

What's good? Unusual vehicles and low mileage vehicles are still saleable, as are good vehicles that can be retailed for under $10,000. What else is new?

We don't expect things to change much and think we are looking at a continually weakening market over the next two months. Vehicles could become awfully cheap in October and November and there might be some real bargains out there if we have any money left to buy anything

Dan Galves