Although the chatter throughout the used-vehicle market has centered on concerns of whether the so-called bubble will soon burst, Black Book’s Ricky Beggs stressed that while he appreciates the trepidation some dealers may have, there are mitigating supply and demand dynamics that should relieve some of the fear.

In other words, used-car demand should stay afloat for a while.

“This is a legitimate concern when, as a dealer, you are committing considerable resources to inventory at today’s record strong pricing that might still be on your lot in 45-60 days from now,” Beggs said during the latest “Beggs on the Used Car Market” video report, referring to the concerns many are expressing about a potential used-vehicle bubble burst.

“Just thinking about what month we will be in at that point makes the concerns even more legitimate,” he added.

Beggs continued: “I understand the concerns, but also see what the scenario is regarding the supply of available inventory now; how long it will be before the supply line is refilled out of Japan on some new cars; and the constantly increasing need for replacement vehicles as the result of the tornados all across the Midwest and South; and the flooding along the Mississippi.”

To show that demand for used vehicles isn’t going anywhere soon, he pointed to reports of more than 70,000 recent storm-related auto insurance claims in just one small pocket of the U.S.

“Demand continues to grow while supply remains the same,” Beggs added. “Does that sound like the bubble is ready to burst?”

Instead, he believes that a more likely scenario is that “some variants within the bubble might be changing.”

Moving on to look at the wholesale trends in the past week in more detail, Beggs said both the number of adjustments and amount adjusted have been steady. More specifically, there were 1,160 adjustments per day, more than half (52 percent) were upward.

“Overall the trends continued very similar to the past several weeks. The cars continued a positive trend but at a little smaller dollar rise than the previous three weeks,” he shared.

“The trucks still declined in an amount very similar to the previous four weeks,” Beggs added.

Gas Price Impact

Continuing on, Beggs also shared some thoughts about the recent slowdown in fuel costs over the past couple of weeks. He cited some various trends spotted in the U.S., as well as the projections of the Gulf Oil chief executive officer, who is forecasting $3.50 per gallon fuel costs by Independence Day.

“As I put these thoughts together we have seen no affect on any market segment values or activity such as more significant increases on the full-size type units or decreases in value trends on the more fuel efficient smaller models,” he shared. “At $3.50 per gallon level I would expect some trend variances.”

Specialty Markets Report

Moving along, Beggs also shared some insight into different vehicle types in a separate report known as “Beggs on the Specialty Markets.”

Starting with motorcycles and powersports, Beggs pointed out that pricier than $4/gallon gas  has spurred values in these particular segments to actually jump.

For instance,  the latest values for scooters and smaller displacement entry-level bikes are close to 3 percent stronger.

“This is partly a seasonal phenomenon where a lot of new riders are looking for their first ‘cheap’ bike, along with the rider looking for the 50 plus mpg bike, justifying the thrill of becoming both a motorcyclist and a more fuel efficient commuter during the warmer weather,” Beggs shared.

“This scenario happened in 2008, prior to the most recent recession. Now, we are seeing this reaction again,” he added.

Meanwhile, personal watercraft values climbed 3.3 percent month-over-month and jet boats are up 4 percent, Beggs said. He attributed this to warmer weather as well as the fact that these segments serve as an “affordable entry point” for consumers to get into water sports. Instead of breaking the bank on a traditional boat, they can opt for these less expensive models.

Next up, Beggs delved into the collectible CPI market. Typically, this time of year is when prices are the highest due to the weather being ideal for driving these rides.

Offering some specifics, Beggs said muscle car values have climbed 0.5 percent, while European sports cars have jumped roughly 1 percent. There has been just over a 2-percent hike in collectible pickup prices.

Beggs shared some details from Mecum’s recent Original Spring Classic Auction in Indianapolis. The highlight of the sale was the sale of two Hemi Barracuda hardtop models, Beggs suggested. One was an excellent-condition model said to be the last one ever built, and it sold for $550,000

Meanwhile, $255,000 was the fetching price on an un-restored but correct 1970 Barracuda, according to Beggs.

“Also notable was a pair of special order 1969 Camaros. The first was considered to be the best Yenko around, and it brought a healthy $345,000,” Beggs noted. “The other, an excellent ZL1, brought slightly less at $305,000. It looks like the muscle market is alive and well, especially at the top.”

Moving over to the recreational vehicle market, Beggs spotted some “mixed” results for May as compared to April.

“There are signs that a slight shift in retention might be occurring as some of the larger franchised dealers were absent from some auctions,” he suggested. “Could this possibly be related to extra new unit inventory and special incentive programs keeping them busy, while also enabling them to get their used inventory directly from the trade-in route?”

Beggs indicated that some sale attendees suggested that economic concerns have pushed consumers back from more expensive RVs. However, he said that some auctions were still seeing the robust attendance and values in May that they experienced in April.

“Looking at the most recent data, the average price of Motor homes, from Class A to Class C, the published values were at $42,196. With the trailers, both 5th wheel and bumper pull units, was at $11,291,” he noted.

Motor homes values have dropped a little more than $500, while trailer values have climbed close to $140, Beggs pointed out.

He went on to note: “In our conversations, several dealers have indicated that the demand and retail interest for the diesel pushers was a unit under the $100,000 mark, while the Class A gas models had to be under $50,000.”

Escalating gas prices are “undoubtedly” impacting RV values, he stressed, but more because of the psychological affects of higher fuel costs versus the impact in terms of “real dollars."

“Although when viewed in real dollars, the increase in fuel costs for an average year of RVing would work out to well under $1000 for the average person, there is a psychological barrier that comes into play when a consumer is considering the purchase of any fuel thirsty vehicle,” Beggs explained. “Perhaps this accounts for the slight bump in towable prices and the dip in motorized prices?”

Lastly, Beggs offered some insight into the medium/heavy-duty truck and commercial trailer markets.

Sharing a bit of history, Beggs alluded to the mid-1980s introduction of a slope nose/aero tractor version of the traditional class 8 truck, known as “long and talls.”

In the 20-some odd years following the debut of this more aerodynamic truck, each of the class 8 OEMs have added more aero-designed tractor model versions into their offerings, Beggs said.

“With fuel prices out of control and all costs of operation going up, these more aerodynamic road tractors are again looking more attractive to the used truck buyers that have always preferred the long and talls,” he suggested.

“There are rumors that the more aerodynamic road tractors will completely replace the long and talls, just like the conventional class 8 road tractors completely replaced the cabover road tractors which made up 90-plus percent of all road tractor volume back in the 60s and 70s,” Beggs continued.

That said, he urged a bit of caution in viewing this trend. Take a look at a similar trend in the automobile market, Beggs noted.

Although automatic transmissions and small cars have inundated the market, there are still buyers who go for the alternative: stick-shifts and strong horsepower.

“Just like the manual transmissions and big horsepower in automobiles, there will always be the niche market and the buyer that will pay the price and have what he wants,” Beggs pointed out. “The field will probably be narrowed down, but the low boys and flat beds and other specialized haulers will still have their share of the long and talls hooked to them.”

Furthermore, Beggs points to data indicating that in mid- to late-2008,  value retention for long and tall models was at its lowest point. After hitting that low,  the incline in used values for these units has resumed, he explained.

“Operators will figure out a way to pay for the fuel for these not as aerodynamic models,” Beggs noted.

“Cabovers never really looked that great, they were just very practical and maneuverable. Let’s put it this way, slope nose/aero tractors are going to start looking a lot more like long and talls than the other way around,” he added. “This has already started, and you will see it if you take a look at the newest models out there.”