The doom and gloom in the press was getting me down, so I decided to find some solace by searching for a silver lining among all of these dark clouds.  The used market is one; prices are high, demand is strong, and more consumers can view their automobile as an asset and not a liability.  On a more theoretical level, David Wagner, NADA’s Senior Manager of Analytics, provided some other encouraging data that helped improve my day.  The month of May's new vehicle sales were disappointing and when thrown into the cauldron of other bad news (unemployment, consumer confidence, etc.), has cast a grey shadow on the future performance of new vehicle sales for the remainder of the year.

The chart below may provide some hope.  It has been validated that new vehicle prices increased during May.  Although the exact amount of the price increase is difficult to ascertain when considering incentive and dealer discount reductions and MSRP increases, we believe that prices increased on average by $900 in May relative to April.   When you consider a negative shift in demand from gas prices, low consumer confidence, and a general feeling of uncertainty we would have found ourselves sitting on a sales rate of ~12.6M SAAR – not a bad number; a significant portion of the sales slump is due to an increase in price, which improves automaker profitability, not a decline in demand, which is a negative for everyone.   When the demand shift is compounded with the $900 price increase we ended up at 11.8M SAAR, which all things considered is also not a bad number.  It will be interesting to see how profits for the companies not affected by the earthquake in Japan are influenced from the price changes.   There are always trade-offs and I for one was happy to see that manufacturers decided to take price instead of pushing sales through discounting when the Japanese were down for the count.  This scenario has helped keep used prices strong, while the latter would have quickly eroded used values and made your vehicle’s value look like your stock portfolio during the past few days.