Resale Market Stabilizes After 60 Days of Volatility
The wholesale market stabilized in mid-November after precipitous declines in resale values following the tragedies of Sept. 11 and the glut of inventory resulting from the rapid defleeting by daily rental companies and the flood of trade-ins from zero-percent financing deals, said Ricky Beggs, managing editor of Black Book, a resale guidebook headquartered in Gainesville, GA.
“The resale values of some used cars dropped as much as $4,900 in the five-week period follow-ing Sept. 11,” said Beggs. “However, since mid-November the market has stabilized and deprecia-tion rates are in line with typical fall seasonal adjustments, in the $50 to $200 range, varying by make and model.”
Several factors contributed to the stabilization of resale values. “First, the shock of Sept. 11 started to wear off, and second, the wholesale values of used vehicles finally found their spread in relation to zero-percent new-vehicle financing,” said Beggs. Nevertheless, the 2001 winter market is down compared to same time the prior year. “But let’s remember that the strong used-vehicle market we’ve been experiencing is of the longest duration ever,” said Beggs. “This positive cycle has been stretched out for seven years and the market was looking for an adjustment. The shock of Sept. 11 brought about a very rapid adjustment in a very short period of time.”
The strength of the upcoming spring market will be determined by the magnitude of factory new-vehicle incentive programs, added Beggs. Another factor that will influence resale values in 2002 is the volume of off-lease vehicles entering the market, the majority of which will be 1999-models, whose optimistic front-end residuals were set prior to residual adjustments that occurred in 2000.