GAINESVILLE, Ga. -
In his latest Black Book video, Rick Beggs describes dealers’ amazement in the lanes as they were shaking their heads, continuing to bid again and again to get more inventory. While supply has been slow, one newer factor possibly fueling dealers bids could be the potential lack of  new Japanese models as that country continues to cope with a growing a disaster, he noted. 
 
And when a dealer cannot get what a consumer wants in new, he’s likely to bet his competition can’t either and look to move the customer to a late model, or certified pre-owned vehicle. Beggs thinks this could be the case.
 
“Those aggressive bids resulted in conversion rates at many auctions in the mid-70 percent level. It could easily have been even higher but there were a few sellers who turned down some strong bids — I suppose they were thinking the market is going to continue its current climb. Accordingly, 72 percent of the adjustments this past week necessitated a raise in value,” he explained.

Cars and truck segments showed value climbs for the week. And for the second consecutive week, all 10 car segments increased, up overall by $61, led by the most fuel efficient models. Entry level cars, entry mid-sized cars and compact cars increased by $127, $115 and $75, respectively.

And even trucks finished $15 above the zero dollar baseline, leading to eight of the 14 segments went up in value. All of the crossover segments increased, along with the minivan segments.

But he points out, “A rather intriguing positive movement was with the luxury SUVs, which increased by $55. More expected were the next largest increase at +$52 for the compact SUVs and the mid-size Pickups (MPT) at +$51."

So just what is driving up the prices? According to Beggs it can be boiled down to three things.

—What he describes as an ever improving economy, showing pent-up demand. Even the trucks are pretty solid as the service industry is in need of better and even newer tools, he said.

—Rising fuel prices continue to support the increase in values and demand for smaller more efficient vehicles. The current Middle East conflicts and unrest continue to create a focus on the future volatility of gas and oil prices.

—The supply of both new- and late-model used continues to be low. With even more concern that the extended closure of plants in Japan and the U.S. for both parts and final assembly will tighten the supply chain, interest in fuel efficient vehicles is creating excess demand for an already tight supply of these slightly used models.

With everyone else bidding away, Beggs said, “get ready to pay a premium.”

He concluded by asking, “The real question is, ‘How strong can the used-vehicle values go?’ As long as the vehicle gets sold for a profit at retail, you haven’t paid too much. We’ll have some answers as to what is ‘too much’ each day this week as we continue to make the necessary adjustments.”