Galves Values & Auction Data

We frequently get asked if we consider auction results when determining our Galves values. We do, and what we think sets us apart from other valuation guides in this area is that our professional consultants, who have typically spent decades in and around auctions, are experienced enough to interpret the auction data – taking into account a variety of factors that can distort pure auction results- in a way that is more useful and realistic for our subscribers.

What distorts auction results?

“No Sales”: Probably the most important of all the factors that distort the used vehicle market as reflected in auction data are the large numbers of unsold vehicles, particularly at the elite auctions, that are NOT reflected in auction results. Most of these vehicles are unsold because there were either no bidders or the final bids were not sufficiently strong to warrant a sale. In either case, they did NOT reach what the owner perceived as their market value and, in fact, suggest a lesser market value than those that were sold. Currently there are lots of “no sales,” particularly in certain market segments (late model full size SUVs and pick-ups as well as the European & Asian luxury market). We recently tracked one manufacturer’s full size SUV and pick-up offerings at an elite auction and out of approximately 170 units, less than 25% were sold. That kind of sales percentage is not unusual, especially among the ordinary dealer consignment offerings, and yet that weakness is NOT reflected in the auction data.  To look at an auction sheet without considering “no sales” can be dangerously misleading. 

Export markets: Those vehicles that have export value and happen to meet the specialized criteria in terms of color, equipment, and production dates can be worth thousands more than the same vehicle that does not meet the export criteria, thus distorting the market. In addition, mileage is usually a “non-issue” on exportable vehicles and that can skew auction results even more.

Seller incentives: Institutional sellers often offer incentives in the form of cash, floats, or buybacks that can severely inflate the prices of vehicles sold at auction.

Certified programs: Vehicles that qualify for manufacturers’ certified programs, especially those pre-qualified, often bring exceptional (and distorted) prices.

Color and equipment preferences: Certain color and equipment combinations can add significant value and can misrepresent values for lesser equipped vehicles of the same type. Details regarding important optional equipment are not usually included in auction data.

Elite sellers: The elite auctions all have a variety of elite sellers whose business model is predicated on having acquired over the years optimum exposure, reputations, and sources for high quality and often unique vehicles. Their vehicles typically bring significantly more than what would reflect a normal market.

So yes, we certainly do pay attention to auction results, but with the understanding that it is a useful component of our evaluation process only if tempered by an understanding of some of the shortcomings- distortions – of the data. Fortunately our consultants are professionals and they are aware of the circumstances that can distort this information and they take into account those factors when considering auction data.

Market Update: April 4, 2008

While the same basic economic conditions still prevail(see: “The Spring Market: a Perfect Storm?” below)and continue to affect the used vehicle resale market, there seems to have been some stabilization in those market segments hardest hit by the supply/demand imbalance over the past couple of weeks. It also appears that those market segments that were performing reasonably well previously may have gained some additional strength during the same time period. To some degree the market conditions are self-correcting. The supply diminishes as people refrain from trading in vehicles – or dealers refrain from selling vehicles – for the meager dollars they are being offered and the demand for such vehicles increases as their transaction prices become lower. So the decline in the hard hit European and Japanese luxury vehicle segment has slowed (we are not yet ready to say it has stopped or turned around), and the same is true for the weakened full size SUV and pick-up markets. At the same time the more economical and efficient smaller vehicle segment and the harder to find lower price range vehicles have gained in strength and may have increased in value in some instances. Both of these positive trends – a slowing of the decline in the weakest segments and a strengthening in the previously stable segments – will be reflected in the upcoming books where appropriate. We still recommend caution, however, in being overly optimistic in either case and in assuming that these recent trends are the norm for the duration of this unusual market.