Good buys in a weak market.

We’ve been suggesting for months that this has been one of the
weakest markets in memory, recent or otherwise. Frankly, we are
not surprised. We have had three or four exceptional new vehicle
sales years in a row. The past year and a half has been
dominated by extreme incentives that have pushed millions of
buyers into new vehicles they might otherwise have done without.
Lease returns are flooding the used car market in near record
numbers. And the economy is staggering. What in that scenario
would foreshadow a strong market for used vehicles?

What these conditions have created, however, are some real
bargains in used vehicles. If you are a consumer and have any
money left, you might seriously consider a used vehicle as your
next purchase. If you are a dealer, you might find some real
sales potential from among those many vehicles that have been
beaten down by the market conditions. Take, for example, a
one-year-old Cadillac deVille. A year ago that car had a book
value of $28,000. Today, a one-year-old deVille has a book value
of $24,000, or $4000 less than the same vehicle was worth last
year. That is not a particularly unusual case. A one-year-old
Mercedes E320 is worth $3,400 less than a year ago. A
one-year-old Jaguar XJ8, $4,300 less. A one-year-old Lincoln
Town Car, $4,000 less. It is, in fact, fairly typical for a
one-year-old vehicle to be worth 10-15% less than it was a
year ago.

The extreme pressure new vehicle incentives have created to
push down the value of one-year-old vehicles has, of course,
filtered down to older vehicles as well. Those vehicles coming
off of lease in large quantities, primarily three year old cars
and trucks on 33 to 39 month leases, were a bargain last year
and are even more so today. A three-year-old Honda Accord LX
was in the book last year for $11,150. Today a three-year-old
Accord LX is in the book for $9900, or $1250 less than a year
ago. A three-year-old Chrysler Town and Country Limited is in
the book for $1950 less than its counterpart a year ago. A
three-year-old Lexus GS300 is worth $2600 less this year than
last. A three-year-old Mercedes CLK 320 Cabriolet, $3800 less.

As you can see, there really are some good buys to be had in the
used car market for those of you who have managed to resist the
temptation of those extensive new vehicle rebates and
incentives.

We are in the process of putting 2003 prices into the books, and
we can tell you that it looks as if they are suffering the same
fate and will be going into the books for substantially less
than
their current year counterparts did a year ago. If you are a
dealer faced with appraising one as a trade-in, be careful. As
always, don’t hesitate to call us for assistance.

Dan Galves