Most priced vehicles on galves.com (past 30 days, )

posted March 22, 2011

1. 2008 HONDA ACCORD EX 4 DOOR SEDAN 2.4L 4 CYL
2. 2008 JEEP GRAND CHEROKEE LAREDO 4 DOOR SUV 3.7L V6
3. 2008 ACURA MDX 4 DOOR SUV 3.7L V6
4. 2004 JEEP GRAND CHEROKEE LAREDO 4 DOOR SUV 4.0L 6 CYL
5. 2008 CHEVROLET IMPALA LT 4 DOOR SEDAN 3.5L V6
6. 2008 HONDA ODYSSEY EX 4 DOOR WAGON 7P 3.5L V6
7. 2009 TOYOTA CAMRY LE 4 DOOR SEDAN 2.4L 4 CYL
8. 2008 HONDA CR-V EX 4WD 4 DOOR SUV 2.4L 4 CYL
9. 2009 LEXUS RX350 AWD 4 DOOR SUV 3.5L V6
10. 2004 LEXUS RX330 AWD 4 DOOR SUV 3.3L V6

February Market Conditions

We are a few weeks into the new year and it looks as if things are beginning to settle down into a now familiar pattern for the used vehicle market: scarcity and strength. There was something of a build up of supply to start the year as a result of auction activity having been disrupted by the year-end holidays, but that was met with a healthy pent-up demand as dealers replenished depleted inventory.

So we expect the market, barring some unusual economic conditions or fuel price spiking, to be very similar to last year. We will not be surprised if vehicle volumes are up some in 2011, due primarily to increased new vehicle sales and trade-in volume, but we think whatever increase in supply that occurs will be will be met with an offsetting increase in demand as the economy recovers and consumers bite the bullet and replace those vehicles they have been nursing through the last couple of years. I recently read that 85% of used-car purchases are made in order to replace vehicles thought to be “no longer useable.” I’m sure some of that is simply human nature rationalizing the purchase of a newer vehicle, but still, that’s a huge number.

Higher Mileage Vehicles More Acceptable
One of the things we have seen happening as a result of the lengthy period of scarcity that has dominated the market in recent times has been a general change in dealers’ attitudes about vehicle mileage. Many dealers have had to become more accepting of higher mileage vehicles in an effort to maintain what they consider reasonable inventory levels. There simply aren’t enough “right mileage” vehicles to meet demand, so where in the past a dealer might have largely ignored vehicles with over 50,000 miles, today he may be chasing vehicles with 60,000 or 65,000 miles. It’s likely that consumers have had a similar change in thinking as they have had difficulty finding those lower mileage vehicles and may have begun to recognize that the price premium they have to pay for those vehicles is questionable economics. Together with the perception (probably accurate) that vehicles are of higher quality and last longer these days, slightly higher mileage vehicles have become more saleable, both wholesale and retail.

Lower Mileage Vehicles Worth More
The fact that vehicles are scarce means that low mileage vehicles are even more scarce than usual and are therefore in even greater demand. There is still apparently a group of consumers who will pay a premium for lower mileage vehicles, and that translates directly to the wholesale market. Lower mileage vehicles have become increasingly rare, are therefore in greater demand, and have become pricier.

50% Giveback Increases to 75%
You may have noticed that we have recently increased our give-back mileage adjustment for lower mileage vehicles in response to this trend. Where we used to give back 50% of our mileage deduct amount for lower mileage vehicles, we now give back 75%.

So a $10,000 vehicle with a $100 deduct for every thousand miles over 50K would formerly have had a GIVE BACK amount of $50 for every thousand miles LESS than 50K. On this same vehicle we now give back $75 for every thousand less than 50K. If it had only 30,000 miles (20,000 to the good) the previous give back would have been $1,000 but now that increases to $1500. We have included information about this change in our printed books and of course, users of galves.com or our other electronic versions have these calculations made automatically for them.

We expect the overall market to continue to be steady and quite strong as we move into spring, fueled by a continued relative scarcity of product and increasingly heightened retail demand.

2010: The Year in Review

by Dan Galves

A Relatively Stable Year With Prices Rebounding
As years go, 2010 was a relatively stable one, especially when one compares it to the recent past.  2008 will largely be remembered for the spike in fuel prices that created havoc with the gas guzzling market segments such as full size SUVs & pick-ups and full size cars. That was closely followed by a more generalized ‘market malaise’ resulting from the near collapse of the banking system. 2009 brought a general recovery, relatively speaking, as most vehicle segments returned to some degree of normalcy fueled by a severe lack of supply and a bit of a ‘feeding frenzy.’ Retail buyers who had resisted the buying urge for as long as they could slowly re-entered a market severely depleted of good quality vehicles in most segments. For much of the year, and in many segments, prices rebounded from the depressed market of the previous year.

 2010 has been, in comparison, a much more typical year for used vehicles. A continuing shortage of vehicles – especially good, right mileage ones – has brought something of a return to normalcy and predictability. That means that the spring market was relatively strong in most segments and had legs as well. Although demand was just so-so, supply was very light in many segments. Good vehicles were scarce just about everywhere and did well. Exceptional vehicles were exceptionally rare and brought exceptional prices. At a recent auction I watched an incredulous dealer who thought his final bid was pretty incredible ($11,700 plus fees for a 2001 BMW 330CIC with 36K) shout in disbelief as the car was no-saled on the block (he ended up paying $12,000 plus fees).  I was also at Manheim on the first Friday sale after the Thanksgiving hiatus and witness to a sale of the sort of strength and activity I’m doubtful has ever occurred in December at Manheim’s flagship auction and perhaps anywhere else as well. The consensus is that the strength is more the result of scarcity of acceptable product rather than strong retail demand.

Higher Mileage Vehicles More Acceptable
As often occurs when vehicles are generally scarce, mileage parameters get stretched and dealers will accept and pay more for vehicles with higher mileage than they would normally accept. That has certainly been the case this year and will probably continue as long as vehicles remain scarce. Our mileage standards are meant to reflect the mileage at which vehicle segments begin to move from acceptable for the same-make franchised dealers (which are most often the strongest buyers for those vehicles) into second tier buyers who are not quite as demanding. A conversation we will be having as we move forward will be the possible stretching of our own mileage standards to better reflect buyer tendencies as they have evolved in response to diminished availability.  

Equipment Matters
In many cases, equipment levels have become increasingly influential in used vehicle values. Among some vehicles, the absence of such options as navigation, moon roof and leather can make vehicles almost un-saleable. Whereas scarcity of product has made dealers more tolerant of higher mileage, such does not seem to be the case for equipment missing among vehicles where it is clearly expected. A Lexus LS460 without navigation, for example, would be a considerable marketing challenge.

 Luxury Vehicles Steadily Decline
The one segment that did erode steadily throughout the year – sometimes even precipitously – was the luxury segment, particularly cars and, most particularly, the more expensive models.  That seems to be primarily due to the fact that those vehicles returned to the market in comparatively greater volume and had comparatively lesser demand than most.

All-in-all, it was a pretty good year if you were not addicted to excitement; relatively consistent and predictable, a far cry from the previous two years. 

 As always, we are extremely grateful for your continued support  and we wish you a very special holiday season and a pleasant  and fruitful New Year.

Top 10 Most-Priced Vehicles on galves.com:

(January 1 thru October 20, 2010)

1. 2007   TOYOTA CAMRY LE 4D
2. 2007   HONDA ODYSSEY EX Wagon V6
3. 2007  JEEP GRAND CHEROKEE LAREDO SUV 
4. 2007  HONDA ACCORD EX 4D 4 CYL
5. 2007  ACURA MDX  SUV 3.7L V6
6. 2004  JEEP GRAND CHEROKEE LAREDO SUV
7. 2009  TOYOTA CAMRY LE 4D
8. 2007  HONDA PILOT EX  SUV 3.5L V6
9. 2007  HONDA CR-V EX  SUV 4 CYL
10. 2008  LEXUS RX350 SUV 3.5 V6

October 2010

I indicated in my last market conditions report that I thought September market conditions would follow a general decline that we were experiencing during the month of August and that the market, though robust for unusually desirable vehicles, was actually quite thin and unpredictable once you got past those exceptions. What I’ve seen since, however, is a strengthening market in most segments and much higher demand for the run-of-the-mill vehicles that make up the bulk of the vehicles available for purchase. My assumption is that August demand was severely depressed as summer wound down and vacations and back to school preparations took precedence over vehicle concerns among the general population. Supply continued to be low in most segments so the decline was slow but steady throughout most of the market.

 Supply continues to be low as we move through September, especially of good condition, right mileage vehicles, and demand seems to have perked up. Hence the general strength we are experiencing at a time of year we typically see the opposite. So most market segments are seeing an increase in activity in the lanes even among the more mundane and ordinary vehicles relatively ignored for much of the year. Exceptional vehicles continue to be scarce and bring exceptional prices as expected. The surprise factor is that their more ordinary counterparts are also doing quite well. 

 Late-Model and Luxury Units Down
Late model vehicles can be exceptions to the overall strength of the market, particularly where there are strong incentives or aggressive lease deals being offered. 2009 Hyundai Genesis 4 doors, for example, seem to have recently dropped significantly, perhaps as a response to the aggressive $399/month lease being advertised seemingly every other commercial on TV. On the other hand, where there is a lack of new vehicle supply and few program vehicles available there can be a strong market for certain late model vehicles.

I know this must seem like a broken record by now (do they make records anymore?), but the one segment that continues to be weak, and in some cases extremely so, is the import luxury market. In particular the high end of that market is eroding quickly. Vehicles like Mercedes S550s, BMW 7-series, Jaguar XJs, and Lexus LSs are very difficult to handle successfully in this market. Most convertibles and sport coupes are suffering a similar fate. There is a reasonable supply and little demand for vehicles such as BMW 3-series convertibles, Z4s, Audi cabs, Mercedes CLKs, Volvo C70s, and they have softened considerably of late.

Price range vehicles of all sorts continue to be strong, especially if they are healthy examples. Condition in this segment is the major factor and even high mileage offerings do quite well. Low mileage really good ones can be off the charts.

Most other segments are pretty good right now. Pick-ups, SUVs, compacts, mini-vans, mid-size cars, full size cars: all good if of reasonable quality.

Normally we would be forecasting a strong decline in October, but we’re not so sure this year. We expect the short supply in most segments to continue and the demand to hold up, so we expect the market to remain relatively strong for the next few weeks at least.

September 2010

September should be much like August
We expect that pretty much what we experienced in August we will continue to experience as we move through September. August saw a general decline in wholesale prices in most segments and a steeper decline in the European and Asian luxury market, especially at the top-end of those markets. That overall pattern is not unusual for a late summer market and we don’t expect September and the early fall market to vary significantly from its normal pattern of general decline, which is usually a bit steeper than what we experience in August.

What is tricky about this market and can be misleading is that the very best of the vehicles sold in most market segments still show remarkable strength and can easily lead to the false assumption that the market is strong throughout. The fact is, it continues to be a thin market: once you get beyond the most sought after vehicles in a segment, by virtue of some combination of trim level, mileage, equipment, condition, and color, the more ordinary vehicles bring ordinary money at best and are relatively difficult to sell except at a discount.

Price Sells
The segment that continues to be strong pretty much across the board is price range vehicles. Good ones are scarce (especially among domestics) and demand is high, and so are prices. It doesn’t really matter much what it is, if it is in a price range far removed from what a new vehicle in the segment costs and is in good condition with reasonable miles and condition, it is desirable and will do well. The European luxury segment, for example, is generally weak, but if you have a 2005 Mercedes S500 with 45,000 miles, a sport package, and it’s black and tan, you can bet it will ring a few bells. An ordinary silver and gray one with 60,000 miles, however, is a very different story.

Sport Coupes & Convertibles Declining
Of course sport coupes and convertibles are declining rapidly in this market. Anyone who wants one already has one (or maybe 2 or 3) and there will be little demand until spring. BMW 3-series convertibles, for example, have taken big hits of late and you can sense that SLs, 6-series, SC430s, Corvettes, Mustang GTs, Audi A4s, Jag XKs, Volvo C70s, etc., are not far behind.

Most luxury segments are generally weak and weakening as well. New body S550s, 750s, LS 460s, XJs: all have dropped significantly recently. The same holds true for much of the luxury SUV segment including such vehicles as Audi Q7s, Mercedes Benz GLs, and BMW X5s and X6s.

Pickups are holding their own if they are properly equipped and of good quality and somewhat distanced from new vehicle pricing for similar vehicles. The same holds true for economy vehicles, compact SUVs, and just everyday transportation cars as long as there are not large numbers of lease terminations pushing them down.

Exceptional Vehicles Scarce
We do think that the market will continue to behave along these same lines for the next 30 days at least. Exceptional vehicles will continue to be scarce and relatively strong, ordinary vehicles in most segments will be difficult to sell and continue to erode steadily and late-model vehicles will continue to decline a bit faster than normal as manufacturers begin to push the envelope trying to sell new ones.

Dan Galves

2008: The Year in Review

       

As 2008 draws to a close, it can be said that this has been a most unusual year for the automotive industry. That is, of course, an understatement. This has been an unprecedented year, and certainly the most challenging year we’ve experienced since we first began publishing our trade-in values in 1957. A perfect storm of events – a doubling of fuel prices for much of the year, a faltering economy accompanied by a 40% decline in the stock markets, the demise of several major financial institutions and a government bailout of several others, a housing crisis threatening the stability of many families and their financial foundation, record level increases in unemployment, a dramatically changing political climate, to name a few – has conspired to undermine our overall economic stability. While the automobile industry has not been suffering alone, it has certainly been hard hit and is likely to experience long term issues as we fight our way through this very difficult business cycle.

         Subjectively speaking, this has been a year without rest. As those of us who have been active in the industry for any length of time know, there are usually periods of the year when the used vehicle markets are extremely stable and experience little fluctuation. Historically those stable periods offer those of us in the guidebook business time to focus on some of the fringe components of the business while still safely watching our critical pricing responsibility. Not so this year. First the spike in fuel prices created significant movement among both the fuel-sippers and the fuel-guzzlers. Each market segment (and those in-between) demanded careful attention as consumers responded to the abrupt economic impact of fuel costs on their budgets and their response eventually filtered down to dealers’ buying/trading decisions.  Then the already supply-burdened luxury car and truck segment that demanded close watching and adjusting all year was further deflated by the economic crisis that brought demand almost to a halt. Ultimately that lack of demand reached down to all segments of the market and has brought us to where we are today.

Plenty of objective evidence exists to illustrate the unprecedented market we have experienced this year as well. In general, the luxury car and truck segment of the market has experienced a 15-30% decline from last year’s less than stellar market.  This has been a year of unprecedented erosion in used vehicle values as the following examples, based on Galves trade-in values, illustrate:  

Luxury Cars & SUV’s	December 2007	December 2008	Difference	Decrease
Two-year old Mercedes E350	$25,800	$18,200	$7,600	29%
Four-year old Mercedes S430	$27,500	$20,500	$7,000	25%
Three-year old Porsche Cayenne S	$32,800	$27,700	$5,100	16%
Three-year old BMW 750Li	$38,500	$33,000	$5,500	14%
Two-year old Lexus RX350	$29,000	$25,200	$3,800	13%

 

Mid-Level Cars & SUV’s	December 2007	December 2008	Difference	Decrease
Two-year old Ford Fusion SE	$10,900	$8,650	$2,250	21%
Two-year old Gr Cherokee Laredo	$13,200	$10,700	$2,500	19%
Two-year old Explorer Eddie Bauer	$16,100	$13,150	$2,950	18%
Three-year old Avalon XLS	$18,300	$15,600	$2,700	15%
Three-year old Accord EX	$12,900	$11,700	$1,200	9%

 

We believe that 2009 will continue to see steady declines, but not at the rate we saw this year. Much of the adjustment has already been made in the values and while we believe demand will continue to be diminished, so will supply. Eventually people need to replace vehicles and used vehicles should be in relatively high demand compared to new vehicles given their dramatically eroded values and consumers’ shrunken budgets.

 

 

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.

The Economic Crisis

I’m writing this as Congress debates how to deal with the current economic crisis that is stifling most of the nations business endeavors including, of course, the automotive industry. Reports are that at the present time there is very little action in the used vehicle marketplace, certainly not a surprise given the economic climate. With the exception of lease terminations and program vehicles there is very little supply. While that might normally signal an upturn in market conditions, a similar lack of demand is, it seems, creating a stagnant market that may very well have nowhere to go but down as we enter the normally sluggish months of October and November.

Previous to the economic crisis we were experiencing some renewed vigor in the segments that had been hardest hit by the spike in fuel prices. Our best guess is that those gains will be forfeited in the near future as the poor business climate and seasonal stagnation take their toll. We’ve already seen a “back-to-reality” movement among those highly fuel efficient vehicles that had captured consumers’ fancy until there were no other delusional retail buyers left out there willing to pay the exorbitant prices necessary to own such a vehicle. Most of the more mainstream economy segment should hold up quite well in the near future as we expect very little supply in that segment and continued reasonable demand.

We continue to think that relatively high levels of lease terminations among the European and Asian luxury segment will overwhelm demand and that that market segment will remain weak. One wonders, however, how cheap these vehicles can get before they begin bumping up against the near luxury segment. When you can buy an ’06 Mercedes S350 for very similar money to an ‘06 Infinity M35, it gives one pause for thought.

While full-size pickups and SUVs had gotten so cheap they actually regained some desirability and accompanying price recovery in recent weeks, we think they will once again begin to falter as we enter the winter months and the sluggish economy forces consumers to pay increasing attention to fuel prices.

Of course all bets are off if the government doesn’t do something to jolt the economy out of its current dismal state.

Dan Galves

Market Stabilizes But Quality Vehicles Remain Scarce

The current used vehicle market has stabilized in many segments due largely to a general lack of supply and some moderation of fuel prices. The scarcity of product is largely due to a decrease in dealer consignment vehicles at auction due to a slump in new vehicle sales and a resulting lack of trade-ins as well as the willingness of many dealers to keep for retail vehicles they would formerly have deemed unsuitable for their lots. One of our auction consultants told us that one auction bigwig confided that while every successive sale seemed to set a new record for dealers in attendance, each sale also saw a similarly unprecedented lack of inventory for sale. Were it not for the sluggish economy and the seasonal decline we usually experience at this time of year we might expect to see a really robust market. As it is, we are seeing some general stability in what is usually a deteriorating market.

Specifically, those mid and full size SUVs and pick-ups that were almost ‘unsaleable’ in previous weeks are actually attracting some attention among dealers and apparently among consumers as well. The other side of the coin is that some of those economy cars that have seen an uptick during what are normally very sluggish summer months are beginning to experience some minor erosion. Those few vehicles, mostly hybrids, that have experienced significant increases in value over the past few months are coming back to reality. We think you will see some significant declines in cars such as the Toyota Prius and Honda Civic Hybrids over the next few weeks.

Scarcity has moderated the decline of sport coupes and convertibles recently and that trend will probably continue. The one segment that seems to have continued its relatively steep decline is the Asian and European luxury vehicle contingent. Supply still seems to be overwhelming demand in much of that market.

While we are certainly glad to see some relative stability in what has been a very difficult market to stay abreast of, we remain cautious for the future. It is, after all, almost October, after which of course comes November and December, traditionally weak months in the wholesale calendar. Scarcity of product, however, may very well moderate the severity of declines we are used to seeing over the next few months.