CARMEL, IN - Although wholesale used-vehicle prices were essentially flat in September compared to August, this performance almost seems robust when you consider the dramatic volatility in financial markets, the credit gridlock, and concerns about a recession. That is according to Tom Kontos in his “Kontos Kommentary” on the current used-vehicle market conditions and outlook.
Despite the used-vehicle market’s recession-resistance, however, the market is feeling the impact of double-digit year-over-year declines in retail sales resulting from a lack of traffic and diminished credit availability, Kontos writes. Dealers, who might normally stock up on rental and fleet units that come available this time of year due to fall model-year-changeover defleeting, are unwilling or unable to add to their floorplans with credit and sales prospects so constrained.
There is some good news, Kontos reports. Average prices for SUVs and pickups rose again, supporting the belief that prices in these segments hit bottom in May and June when gas hit a $4-plus peak. However, compact car prices are no longer benefiting as much from strong dealer interest in purchasing more fuel-efficient vehicles.
Demand for nearly new, usually pricier units also appears to have softened, as evidenced by lower conversion rates (units sold as a percent of units offered) for these vehicles. But the nearly new units that sold well in September fetched higher prices due in part to lack of overall supply of off-rental units.
Regarding credit, like the flow of credit today, travel came to a halt immediately after Sept. 11, 2001, as security concerns outweighed mobility needs.
Eventually, travel resumed to pre-Sept. 11 levels, though with greatly decreased convenience due to heightened security screening.
Credit will eventually flow freely again, Kontos wrote, allowing commerce to resume at levels that generate economic growth and prosperity.
But, like travel today, things will not be the same as they were before the crisis because obtaining credit will be more difficult.
In the end, new “security” measures will make lenders, borrowers and investors more disciplined just as travelers have learned to be.