Unfortunately, this year, it happened a little sooner than expected. But let's look ahead. What is the forecast for resale values in the 2001 calendar year, in particular the spring used-vehicle market? First, let's examine the recent past and then current market trends. In the 2000 calendar year, the wholesale market for used commercial fleet vehicles has been very stable. It had its ups and downs, but on the whole, there has been a good balance of supply and demand for used commercial fleet vehicles. As a result, resale values were stable for most 3-year-old commercial fleet sedans. Although resale values for minivans were in the doldrums earlier in the year following a blitz of heavy retail incentives on some slow-selling models, this was balanced by an ongoing strong resale demand for full-size pickups. Several market trends will influence used-vehicle pricing in the 2001 calendar year. They are: 1. Higher-Mileage Vehicles: More and more commercial fleets are keeping vehicles in service longer. As a consequence, more and more higher-mile fleet vehicles are being found in the fleet/lease lanes at auctions. A key reason is that high vehicle quality allows for longer service lives. 2. New-Vehicle Pricing Restraints Help Lower Net Depreciation: For the fourth consecutive year, manufacturers have kept a lid on new-vehicle prices. Capping new-vehicle prices has helped to stabilize net depreciation on fleet vehicles; however, this has also caused resale values to remain flat. 3. Oversupply of Heavy-Duty Trucks in the Wholesale Market: There is an annual oversupply of 45,000 medium- and heavy-duty trucks, which is projected to continue for the next three years. As a result, heavy-duty truck resale values have declined an average of 25 percent due to aggressive incentives by manufacturers selling new trucks in a weak market. Another consequence is the movement to longer lease terms. Historically, lease terms for heavy-duty trucks have been five years/200,000 miles. They are now migrating to seven years/300,000 miles. 4. New Remarketing Channels are Being Explored by Commercial Fleets: Some fleet management companies are testing new remarketing programs designed to migrate more used-vehicle transactions closer to the retail level. For example, some fleet management companies, such as PHH, are expanding their dealer consignment programs. GE Capital Fleet Services signed an agreement with Innovative Fleet Management to develop a direct-to-dealer used-vehicle resale channel in the United States. Others are involved in pilot programs using local dealer Internet sites to remarket fleet vehicles such as ARI's pilot program with Driveitaway.com in the Philadelphia region. Also, companies such as LeasePlan are finding success by increasing their use of online auction Web sites, which occur simultaneously with live auction sales. However, a few dark clouds are on the horizon: Uncertainty About Factory Incentives and Lease Subvention: Although 2000 is a banner new-vehicle sales year, vehicles are still being heavily incentivized. If new-vehicle sales decline in 2001, the question is how much further will manufacturers increase incentives and lease subvention rates to boost sales? As we all know, aggressive new-vehicle retail incentives exert strong downward pressure on used-vehicle resale values. Possible Tightening of Consumer Credit: There is a possibility of a tightening of consumer credit for cash-strapped buyers of used vehicles, especially for C and D paper customers. Many of these marginal credit consumers are the retail buyers of used fleet vehicles. In fact, 47 percent of the total customers for independent used-car dealers in 1998 were customers with C and D credit. This compares to 33 percent in 1993. Why Remarketers are Cautiously Optimistic Despite these concerns, 2001 is anticipated to be another good year for used-vehicle sales. When I talk with fleet remarketers and dealers, they are cautiously optimistic about the market. They anticipate a strong spring market for used commercial fleet vehicles in 2001 because they believe there will be a continuation of a stable supply and demand for most vehicle categories. Resale values are projected to remain stable for higher-mileage, late-model intermediate sedans, which are the bread-and-butter vehicles of the commercial fleet market. The ongoing strong demand for light trucks, in particular full-size pickups and cargo vans, is expected to continue unabated. Plus, there are several new models entering the wholesale market in volume for the first time, such as the new-style Intrepid, Focus, and 300M, which promise to energize used-vehicle sales activity. However, not everything is rosy. SUV resale values are expected to remain flat due to the excess inventory in the wholesale market. But, on the whole, the expectation is for another stable used-vehicle market in 2001. Let me know what you think.