Resale values for two- and three-year old fleet vehicles were lower in the fourth quarter of 2002 compared to the same period in 2001 when used-vehicle sales hit rock bottom following 9-11.

"The market came down faster in September and October than it did in 2001," said Steve Krnich, sales and new production manager, vehicle remarketing for Wheels Inc., a fleet management company in Des Plaines. One reason for the sharp drop in resale values between Sep-tember and October was that more fleets, industry-wide, began placing new-model orders earlier than normal in reaction to the beating they took in the wholesale market in the fall of 2001. This resulted in an increased supply of fleet vehicles in the wholesale market in September. "Auction volumes were up, but demand remained weak," said Krnich. "However, there was a spike in prices between Thanksgiving and Christmas." During that period, Wheels organized 40 promotional sales held at auctions the weeks of Dec. 9 and 16 to take advantage of the uptick in resale values. "The results were very good," added Krnich.

Another reason for the weak fourth quarter market was attributed to the large incentives manufacturers were offering to stimulate new-vehicle sales. "As long as new-vehicle prices stay low, so too will used-vehicle prices," said Krnich. "The million-dollar question is when are the manufacturers going to ease up on incentives? When are the four figure incentives going away?"

A wildcard for the 2003 market is the upcoming United Auto Workers (UAW) contract negotiations, said Krnich. The UAW's national four-year agreement with GM expires Sept. 14, 2003. The UAW strike against GM in 1998 caused resale values to increase 5 to 7 percent as GM dealers scrambled to acquire used vehicles to substitute for their depleted new-vehicle inventory.

Originally posted on Fleet Financials