Has the wholesale used car market reached its peak?

April 15, 2009

Over the past several days I’ve spoken with many used car buyers that I respect for their knowledge and expertise. Guys like Cary Donovan, Bill Pearson, John Creran and Todd Caputo. These guys spend a large portion of their time analyzing and participating in the wholesale marketplace.The purpose of my inquiry was to determine whether the hot wholesale used car market has reached its peak. While there is no clear consensus that it has, there is definitely a feeling that it may have leveled off. My thought is that notwithstanding the lack of trade-ins, the spring market for the car business is quickly turning to summer and historically this means a cooling off in wholesale prices. These buyers, however, seem to all agree that they don’t expect prices to fall to¬†any significant extent.

Today, I read Dealer Communications, Dealer’s Pre-Owned Magazine and mused over the fact that there were two successive articles, the first citing statistics from Openlane stating that, “Dealer interest in trucks wane, while cars remain strong.” The very next article from Ricky Beggs of Black Book (whom I respect very much) saying that trucks remain strong and, “the car market has shown an overall decline for the first time in several weeks.” I think that these conflicting messages tell us that no one really knows, but perhaps subtly imply, that the top of the market may be here or near.

Also, I learned that a manufacturer’s rep at the auction stated that they really didn’t care if he only sold 50% of their vehicles at each sale because they had enough to stretch them out throughout the summer. In other words, their content not to put them all out there and allow the price to be driven down. As a result, I think it’s fair to say that if you buy one of their factory cars, you’ll be paying top dollar.

All of these data points leads me to my previously stated conclusion that we should not be buying deep, but rather more frequently. Don’t let anyone tell you that there’s a shortage of cars, they’re out there. You just have to go out there and get them rather than having them arrive conveniently at your front door as a trade-in.

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