Notes from New Orleans NADA 2009

January 25, 2009

I’ve been a little bit busy of late preparing for and now attending the NADA convention in New Orleans. Although the attendance is clearly down, I have to say that it has exceeded my expectations. Most notably missing are the heavy equipment displays that we are all accustomed to seeing. Things like lifts, car washes, vans and the like are conspicuously absent.

The big news in the inventory management arena is that Dealer Track purchased AAX from JM Solutions. Dealer Track will be offering a multi-tiered product at varying price points. This acquisition consolidates the solutions that promote the concept of stocking based on past history. As many regulars of this blog know, I think that this approach has many flaws and in the past 6 months has proven to be dangerous. Nevertheless I wish these guys the best success with their new venture.

I’ve gotten many questions about my predictions regarding extraordinary deflation in the used vehicle market. I’ve spent a lot of time inquiring as to the reasons for the frothy optimism in the wholesale market place. Some of the reasons are as follows:

  • Up-tick in used vehicles sales in late December while buyers at auctions were not active
  • Unexpectedly harsh temperature and snowfall while gas prices fell to new lows. The combination of this phenomenon turned the market on for 4 wheel drives and trucks
  • Lack of new vehicle trade-ins while dealers plan to increase their used vehicle efforts to compensate for lack of new vehicle business

The guys that I respect the most continue to exercise patient and restraint. They believe as I do that there is nothing in the economic environment that suggests the resumption of normal retail demand levels of the past (anytime soon).

I would therefore continue to exercise a caution and not get caught up in the herd mentality of buying. While I am not positive, I think that we are already beginning to see signs that the post Holiday surge in wholesale interest is beginning to wane. Guys are telling me that if they simply wait for the afternoon, the same vehicles are selling in the lane for as much as 1500 – 2000 dollars less than they were in the morning that day. In the intermediate term there are many dealers that own fresh merchandise for very high prices and they are going to have to ask a lot of money to clear them out. I would advise the dealers to be very aggressive about pricing these vehicles so as not to get caught long with them should the market normalizes as I suspect it will.

I will have more observations to share upon my return later this week.