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All of the trade magazines have been reporting the continued escalation of wholesale used vehicle prices. In spite of these reports, I can’t help but question whether these trends will continue. I say this in light of what I perceive to be soft used vehicle retail activity throughout the entire country. With few exceptions, it seems that cash for clunkers has zapped the vitality out of the previously robust used car market.
To this extent, I asked Rich Kelley of the Germain Group in Columbus, Ohio and Cary Donovan of the Sam Swope Group in Louisville, Kentucky to assess the current and future state of the used vehicle wholesale marketplace. What follows is their assessment. While there are no guarantees of the future, the views of these two highly attuned used vehicle directors represent a realistic and reliable forecast.
From Rich Kelley:
I have felt a softening for the few weeks primarily in what I refer to as filler units. Retail sales have been slowing since the end of August and many dealers have units that they shouldn’t have, but bought out of desperation a month or two ago. Clean, low mile or mileage appropriate vehicles are still short and everyone still has a need for these vehicles. However with inventories filling out many can’t buy more until they move their stale inventory. I have bought more cars this past 30 days at auction than I have the past 90 paying only a little more than I should or on the money. Where I was missing them by $1,000 or $2,000 many times when I quit the next bid buys them. Once sales settle in to the season levels and everyone gets their inventory adjusted it will probably get tougher, mostly likely in November. I don’t know about other dealers but we are in position to buy vehicles at the current market for the first time in many years without the heavy excess inventory we have had in the past. My guess is that more dealers are leaner than years past, some by design, others because the market has driven them there.
From Cary Donovan:
I have definitely experienced a lighter than normal demand in retail activity in both traditional traffic and virtual shoppers beginning around the 15th of September. My experience on the wholesale acquisition front is also the same on the high volume generic units. The rental car companies and some financial institutions continue the weekly weighing of inventory with what I’m seeing to be very low conversion rates. The low mileage low days supply inventory is still bringing primo dollars. My thoughts on the direction we are headed in the 4th quarter of 2009 will be the Operators that truly understand how to engineer inventories and control aging will stay in front of the current challenging curve. Let’s not forget there are a lot of wind down dealers along with an additional 350 Saturn facilities with bonus dollar that are looking for a survival plan and the perceived quick fix is to be a used car super store. This should continue to keep wholesale prices relatively strong thru the year as they attempt to stock up.