Car Dealers Suffering 'Reverse Sticker Shock' in Wake of Sept. 11
Zero-percent financing and rental fleet downsizing due to reduced travel are two post-Sept. 11 factors that have created a “bubble” of oversupply in the used-vehicle market, according to Pulse, ADESA Corp.’s quarterly publication.
The Pulse report says that dealers took in large number of trade-ins during the record new-vehicle sales month of October at the same time many rental companies were taking vehicles out of service. Many of these vehicles found their way to auctions, where wholesale used-car prices are established. Along with existing high levels of off-lease units, this “bubble” caused wholesale used-vehicle prices to fall 5.2 percent in October and 4.4 percent in November, compared to last year’s levels.
“Dealers got a case of ‘reverse sticker shock’ when they realized their surplus trade-ins had to compete with heavy auction volumes from off-rental units,” says Tom Kontos, vice president, industry relations and analytical services for ADESA Corp. and author of Pulse.
The report says that, although zero-percent financing may have dampened used-car prices, incentive-driven new auto sales may have been a major contributor to what strength there is in the current economy. “It appears that Detroit, as much or more than Washington, has been responsible for providing economic stimulus in the aftermath of Sept. 11,” the report says. The report also concludes that dealers who buy used cars at auction while the oversupply is being worked off and prices are low, stand to be rewarded with high retail profits this spring, when used-car demand is traditionally at its highest.