Market Trends

High Cost of Fuel and Weak Retail Sales Softens Resale Demand

June 27, 2006

by Mike Antich

Resale values in the wholesale used-vehicle market have softened as retail sales of both new and used vehicles have weakened, said Howard Graus, assistant manager, vehicle remarketing for Automotive Resources International (ARI), a fleet management company headquartered in Mt. Laurel, N.J. “When dealers are not moving inventory from their retail lots, there is less need to replenish inventory as often at auction. Decreased dealer demand at auction is causing the inventory of used vehicles to increase.”

The shortage of inventory in the wholesale market for the past 18 months that helped bolster resale values. Today, the higher supply of vehicles in some segments is starting to soften resale values. The increased inventory for some makes and models is allowing dealers to be more selective in what they purchase. However, dealer demand and resale values for most intermediate-sized fleet vehicles are comparable to the same time last year.

Another factor impacting today’s market is high fuel prices, which are softening resale values for large SUVs and other less fuel-efficient vehicles. “Even the smaller SUVs are starting to see resale values soften due to high fuel prices,” said Graus. The luxury vehicle segment is also starting to feel the pinch of higher fuel prices. “The reverse is true for compact vehicles, which have seen a positive rise in resale values because of the higher fuel prices,” added Graus. Dealer demand for used vehicles priced under $4,000 has been increasing. Likewise, resale values for work trucks and cargo vans have not been impacted by higher gasoline prices. “Demand for these vehicles exceeds supply. If you have a work truck that appeals to a buying segment, it has the potential to break the bank, no matter what the market conditions are,” said Graus.Let me know what you think.[email protected]

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