Predicting the Future of Used Vehicle Values

 

Below is a question I received from a dealer rep and my reply.

Dale,

I sent your article on Falling Wholesale prices to my dealers. I was asked a question that I would like your answer on…

“My team and I were just discussing this topic yesterday and it is our belief that the rental or fleet vehicles will dip starting in June and it could get ugly…… but we also believe that the company vehicles and the low mileage high equipped units will remain strong for the rest of the year……. What do you think about our view?”

Thanks for your help.

Jeff,

Thank you very much for the question. Because of bad past experience, I will refrain from making specific predictions about future values of vehicles. In fact, I’m convinced that nobody can predict the future accurately and consistently in any venue. Those that try and do so are either charlatans, fools, speculators or economists. Every day I encourage dealers not to be foolish or speculative. If you want to make inventory decisions today based on anticipated future values or availability, you are either foolish or a speculator. Again, nobody can accurately and consistently predict the future – it’s a 50/50 bet at best. The best thing that a dealer can do is to both buy and sell vehicles in the current 30-45 day market. Yes, this means that if you speculate and get it right, you may miss a windfall. But it also means that if you speculate on values and get it wrong, you won’t put yourself into a ditch. Realizing that you are a retailer and not a speculator keeps you headed down the center of the road, and on a long-term journey, that’s exactly where you want to be. I spend the vast majority of my days pulling dealers out of ditches because they guessed the market wrong. I would therefore urge you to simply recognize that every year, used wholesale values in general peak about now, moderate and then decline and usually bottom out in November. Whether any particular segment in the market will behave differently, I can’t say, but again, if we just stick to the game plan of buying and selling vehicles in the current market, we’ll never have to worry about getting caught and long and/or wrong.