An Unprecedented Market

We are currently in a somewhat unprecedented market. Not only have we had to deal with a fuel price issue (which has miraculously abated in the last month), we are now faced with a credit issue that together with a loss of disposable income and general confidence in the economy for a large segment of the consumer base has put severe downward pressure on an already shaky market.  And on top of that it is November, traditionally among the weakest of months in the wholesale auto industry. All in all, something of an imperfect storm. In short, the next couple of weeks should provide an excellent opportunity to buy vehicles but a poor climate in which to sell them.

Hardest hit may be those economy cars and trucks that spiked inordinately during the fuel price hikes. Because many dealers have stocked their inventories with them and have no further demand for them and fuel prices have moderated to the extent that consumers are no longer in panic mode, those vehicles are rapidly coming back to earth. Most vulnerable are the hybrids that experienced such a buying frenzy a couple of months back.

In general, late model vehicles of all sorts are experiencing particularly low demand levels. Buyers seem to be holding back for fear of what the next round of rebates and incentives might bring. For that reason, 2007 and 2008 vehicles of all sorts are generally softer than usual.

The market will probably see erosion in even the most traditionally stable vehicles. Honda Civics and Accords, Toyota Corollas and Camrys, Acura RSXs, Scions and their ilk are all likely to experience softening along with just about everything else in the marketplace. European and Asian luxury cars have already experienced significant declines and those are likely to continue, particularly among the more expensive models.

Even many vehicles in the most popular price ranges may suffer some along with everything else. They held up particularly well during the recent overall declines in the market and will probably decline some as general demand for vehicles of all sorts softens.

SUVs and pickups have actually moderated to some extent, probably due to a diminished supply and some short term memory issues for those consumers who pay attention to fuel prices.

We always reach a period of the year when no matter what the book says, buyers want to buy for less. I call it a false market. Sale prices may actually have only a passing resemblance to what vehicles should be worth and will be worth at some time in the near future. Our sense is that this false market will occur a bit early this year and may last for an extended period of time.