Last updated Wednesday, September 14, 2005

Predicting the future in this business, used vehicle wholesale, is always a tricky business, and perhaps more so given the incentive values currently raging along with the sharp increase in gasoline prices. But I think we are looking at a generally softer than usual fall/winter market that could be significantly weaker in certain segments if gas prices remain at current levels or higher. The after effect of the aggressive incentives on new vehicles is that there is a reasonable supply of used vehicles and very limited demand for them, a situation the always results in a very selective market that rewards the unusual vehicle and penalizes the ordinary one.

We are seeing an increase in the supply of convertibles as the summer winds down and they become more readily available and harder to sell. Unless you have something really unusual, caution would be advisable when dealing with them. I think this fall/winter market will see an even weaker than usual market for convertibles. There seems to be a greater supply than normal (a lot have been sold new over the past few years) and no reason to expect demand to match.

The other market segment that warrants particular caution in the near future in light of recent heavy increases in the price of gas is, of course, the full-size SUV market. If gasoline continues to be in the $3.00-$4.00 range we will see a lot of consumers bailing out of them with extremely little demand to absorb them. It could become an extremely weak market for the Hummers, Suburbans, Excursions, Expeditions, Navigators, Sequoias, etc. of the car world. For someone who only drives a few thousand miles a year, there may be some real bargains available in this segment.

Of course the counterpoint to the gas guzzler segment is the gas sipper group of vehicles, and we can expect to see them strengthen if gas remains around current levels. Already we have seen evidence that smaller, more fuel efficient vehicles are bringing a premium. Diesels and hybrids, very strong before the gas hikes, have become even hotter as fuel prices have increased. That will continue as they become even scarcer. I donít anticipate many will be traded in the near future.

Highline vehicles have been eroding steadily over the past several months and we expect that to continue, but not in a freefall. They are already relatively cheap, and the people who are buying them retail are less concerned with the cost of fuel.

Fuel prices are having only a moderate effect on pickups. They are scarcer than SUVs and have stronger demand. Like smaller cars, smaller pickups are very scarce and exceptionally strong and will continue to be so.

Dan Galves