January 4, 2017 MARKET UPDATE:
With two very significant exceptions we have just concluded another in a series of rather ‘routine’ years in the automotive remarketing game. We haven’t had any fuel price spikes or financial crises. The traditionally lengthy, stable spring market went pretty much as expected, including consistent declines among the saturated higher-priced European and Japanese luxury vehicles, cars and trucks. The summer months saw the beginning of the traditional softening of the market across all segments and the fall months were, as usual, the harshest of all.
Run-of-the-mill mid-sized sedans like Accords, Camrys, and Fusions tended to be untouched through the spring market, many even appreciating slightly from the previous late fall market. Compact vehicles were slightly weaker but were still pretty stable during the spring before weakening a bit throughout the summer and fall. Fuel sippers were definitely impacted by continuing lower fuel prices and suffered a good deal of depreciation throughout the spring and summer before leveling off a bit in the fall. Those same low fuel prices strengthened full size domestic SUVs throughout the spring and many of them also saw prices rise as a result. Pick-ups softened a bit during the spring, probably due to an unusually high supply, before rebounding some in the summer and then declining slowly through the fall.
Continuing the pattern of the past few years, European and Japanese luxury vehicles of all types have simply dropped steadily for much of the year before experiencing generally sharper declines through the summer and fall. They are, of course, much higher priced than most other segments and therefor experience much bigger and more abrupt changes. But their declines seem to be much more consistent month-to-month than they used to be. Their return to a high percentage of lease penetration and the resulting high volume of lease terminations returning to the market seems to cause supply to overrun demand pretty consistently. We expect that to continue in the coming year.
The two aforementioned and very significant exceptions to another relatively typical year are – you guessed it – the VW diesel scandal and the Takata airbag debacle. What a mess. Really, if it weren’t for these two screw-ups we would have had a relatively simple year to deal with. Affected VW models dropped precipitously throughout the spring before steadying during the summer and recovering quite a bit in recent months as people, I guess, got used to the idea and they ended up in the hands of frugal consumers with less “green” ideology. The Takata airbag issue caused different problems, what with the concerns over liability and simply identifying the impacted vehicles to say nothing of potential deadly consequences. Many manufacturers, dealer groups, and independents put a stay on selling them. The effect on identified vehicles that did get to the marketplace with open recalls has been mixed. The shear scope of the recall, tens of millions of impacted vehicles in the US alone, is problematic. It can be months before a fix can be arranged even after the appropriate parties are notified of the issue. For whatever reason, the timely response of consumers with older effected vehicles has been low and slow in the US. For all those reasons market impact has been mixed and largely dependent on the mindset of individual buyers.
Let’s hope that we will avoid similar issues in 2017. We have a new and unconventional president-elect, and a seemingly robust economy. You’d think that the forecast would be for another strong year for new vehicle sales and a routine year in the auto remarketing industry. We are not making any predictions and will patiently wait and see. And hope for the best.
As always, we are grateful for our clients and subscribers and will continue to work diligently to provide the most current and accurate information available. We wish all a happy, healthy, and prosperous 2017!