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June 20, 201 1
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Experts See No Bubble in Used Prices By Ted Craig
Rush - Dated Material
Experts say there’s no used-car bubble, even as wholesale prices hit another record high last month. The Manheim Used Vehicle Value Index reached 127.8, a 5.6 percent increase from the year-ago level. But that’s just a reflection of supply and demand, said Manheim chief economist Tom Webb. “Given the structure of the wholesale vehicle marketplace, you’ll never develop a bubble,” Webb told attendees at the recent National Automotive Finance Association conference. If it were a real bubble, he said, pitchmen would be telling consumers they need a big portion of their portfolio in used cars during a late-night infomercial. In other words, the market lacks the necessary ingredients for a bubble – easy hoarding, ability to speculate and financial vehicles like
futures. “Prices are inflated,” Webb said. “That’s not the same thing as a bubble.” Tom Kontos, ADESA’s executive vice president of industry analysis, agrees. “A bubble would imply a bursting and prices declining rapidly,” Kontos said. “I’m not sure what would drive that.” He points out that the unadjusted numbers already showed softening in May. Kontos said that reflects a typical seasonal pattern. Prices should remain high through the rest of the year. Off-lease volumes will drop this fall since the domestic manufacturers essentially stopped leasing in the fall of 2008. Dealer consignment could take a hit as well as analysts lower their forecasts for retail new-car sales. The vehicles dealers are bringing to auction these days are of a lesser quality than in the past, said Lynn Weaver, general manager of Harrisburg Auto Auction in Mechanicsburg, Pa. Weaver said new-car dealers are trying to retail more of their trades than ever. “If there’s any drop in prices it’s going to be a reflection of that lower quality,” Weaver said. Repos also continue to decline due to tighter lending standards and a shift in consumer attitudes toward making their car payments a high priority. The car market itself has shifted.
Photo by Craig H. Hartley MR. PRESIDENT: Incoming NIADA president Don Fincher stands at his used-car store in Houston. Fincher grew up working at his father’s used-car dealership.
Lifelong Dealer Leads Association
(Don Fincher, the incoming president of the National Independent Automobile Dealers Association, is the owner of Fincher Motor Co. in Houston.) UCN: Could you tell us about your background and how you got into the car business? Fincher: Well, my dad was a car dealer and I used to go down to the lot with him since I was eight or nine or 10 years old. I would help clean up, picking up cigarette butts and gathering up the Coke bottles that would have to be returned. It was a kind of a natural thing for me to go into the car business. My dad instilled in me the value of integrity in dealing with people. I worked with him all the way through high school. I guess I started working pretty regularly in 1970, 1971. Continued on page 8
IN THIS ISSUE • General Motors Co. revamps its certified progams. – Page 3
• An auction owner is battling a toll bridge plan. – Page 10
• A veteran used-car dealer recently moved his operation. – Page 6
• Consumers are switching to smaller vehicles. – Page 14
Continued on page 3
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