On the Road – Detroit, MI

May 1, 2008

Yesterday, I had a really eye-opening experience while visiting a dealership in a Detroit, MI suburb. While using a new tool that was just created to analyze the number and type of used vehicles being purchased in various markets, we noticed something that was fairly alarming. Specifically, we were comparing the number of used vehicles being sold over the last 45 days in the Detroit market (100 mile radius), with that sold in Shrewsbury, NJ with the same 100 mile radius. Notwithstanding the fact that Detroit’s population is two and a half times larger than Shrewsbury, NJ, there are more used vehicles being purchased in the Shrewsbury market.

I guess it’s not a surprise that the used-car market is stronger in some places than others, but I didn’t expect it to vary this much. After some discussion, the dealer and I came to two conclusions, which possibly explain the variance. First, the Detroit metro area is just a terribly depressed market and simply isn’t consuming used vehicles at the same rate as other places. Second, because of employee purchase plans, the used-car business in Detroit has trouble competing with the new-car business. In other words, you can buy a new car on an employee plan sometimes for less money than a late-model used vehicle. The bottom line conclusion is that Detroit just isn’t a very good place to make a large used-car investment. In a moment of serendipity, the dealer said to me, “You know, there’s not a single CarMax in the Detroit market.” I simply responded “Duh”.