Wholesale Market Update March 25th, 2010
Easter is a week away. The first quarter of 2010 has sped by, and spring has arrived. Not only on the calendar, but also in the auto market. The annual “tax season” market spike, is all but over, and so far has been good for most of the dealers I have spoken with. It’s an odd situation, 1/3 of the dealers are breaking all time sales records, 1/3 just seeing normal sales cycles from last year, and the last 1/3 are considering bankruptcy as an alternative business plan. The difference is simple, it’s not the product, the location, or even the facililty of the dealership. It’s the people that work there.
There continues to be fewer used cars in the auction lanes, so prices, as well as sale percentages are still very strong. most dealers think this trend will continue on into the summer. Gas prices are showing signs of life, scaring us a bit, and reminded us of the disaster we faced in the SUV and Truck markets summer 2008.
The market segments that continue to trend upward are the mid-size and intermediate sedan and coupes in the $7,000 to $10,000 wholesale price category. This is typical though, since that price vehicle fits most retail customers budgets more efficiently.
During this season, car guru’s throughout will be attending “auto shows” where manufactures present their new models and concept vehicles. However, the concept car, is not nearly as prevalent at auto shows, as we witnessed in years past, which is severely hurting the entire Auto Show business.
It is interesting for lenders this time of year. The lenders (banks) set the residule values for new models. Residuals set the amount of “projected market value” which is the underlying fulcrum when evaluating lease payments. If you ask yourself “Why does it cost 300 more a month to lease a Cadillac verses a Honda” that answer lies in the ‘residual amount allowed. Honda’s have higher resale values, and less depreciation than domestic manufactures as a whole, hence lower lease payments.
My personal opinion, is the market will soften up a bit prematurly this season. With every high tide, there is a low tide, and I believe gas prices or fear of will drive the big gas prices back down to reality entering summer travel seasons. DO NOT sell your truck or SUV when gas prices spike over fear, you will loose every time. Gas prices are markets themselves, what comes up, must come down. People trading cars in based on gas prices loose more money chasing markets, than they ever would have lost paying more for fuel.
We’ll be in the auction lanes every week, keeping a pulse on the market, and update you here, and on the air, each and every Saturday morning. Feel free to email me any questions you may have regarding your car questions. I will do my best to answer them. JCW