Galves Used Car Market Conditions Report - October, 2013

A Significant Shift We’ve had a relatively smooth ride with respect to market depreciation for most of this year. Vehicles have dropped as they always do, but on a remarkably stable and steady course. Not a lot of drama so far in 2013, no gas crises, no financial calamities: all things considered, pretty unexciting.

Well, for those of you who like living on the edge, that appears to have shifted abruptly in the past few weeks. In fact, it is as abrupt and significant a shift as I can recall in my experience. And it appears to impact all segments, though much more debilitating among later model vehicles of all sorts.

Even Popular Luxury Vehicles Not Immune Hardest hit appears to be the late model European and Asian luxury vehicles, cars in particular. Rarely have we seen what appears to be such an ‘across the board’ shift in demand for this segment. It is as if every dealer who wanted one bought one recently and these units are all still sitting on their lots resting peacefully. Infiniti products have been the biggest surprise thus far, but they are far from alone. We are used to G37s, M37s, and M56s & 45s being among the more stable models, especially considering the relatively high volume of G37s in particular that come into the market on a regular basis. Rarely have we seen them depreciate as rapidly as they have in the last month. Not far behind are many of the offerings of Audi and BMW, including the usually very popular 3-series.

Late-Models Bearing the Brunt Frankly, they all took a serious hit the past few weeks. What does seem to be the case pretty much across the board is that the bleeding slows down considerably when we get to the 2010s and older. That makes sense considering that among much of this segment highest volume occurs in 2011 and up and that later models are disproportionately affected by the current climate of aggressive leasing programs and manufacturer incentives.

While the European and Asian luxury segment is most affected, all segments are experiencing increased erosion. As one would expect, the more expensive models among all segments are leading the decline. And we repeat that among all segments it is the later model vehicles that are bearing the brunt of the burden. With rare exceptions 2010 and down models are depreciating significantly more slowly than 2011 and up.

What is striking is that seemingly everything is affected. There are vehicles that remain untouched by the decline, but they are rare. No segments appear to be immune. Of course convertibles and sport coupes are among hardest hit while 4-wheel drive pick-ups are withstanding the pressure relatively well.

It’s hard to say where we go from here, but we would not be surprised for the market to continue as such for at least another few weeks. There is, thankfully, a point when favorable prices create demand among buyers and weak prices retard trading and selling and therefor supply.

Dan Galves