COVID and the Car Market – Booming Used Car Sales
While the pandemic has traumatized us all, and certain industries have been devastated, others are booming. The travel industry, oil and gas companies, brick and mortar retail, and banking have endured significant challenges during the coronavirus and government lockdowns. Other sectors of the economy have adapted, grown, and are thriving. While main street is in turmoil, Wall Street remains bullish.
Business Sectors Thriving During the Pandemic
As bleak as things appear, some industries and business sectors are performing very well. Online is booming; E-commerce has emerged as a clear-cut winner. Related industries, such as logistics and last-mile distribution centers, are thriving.
Tech stocks like MAGA (Microsoft, Apple, Google, and Amazon) have been big winners. New trends like telehealth are being adapted. Biotech companies such as Moderna, maker of one of the two new vaccines, have enjoyed increased valuations. Cryptocurrencies are growing exponentially, with BitCoin trading at over $23,000.
Home sales are up double digits versus a year-ago as buyers seek larger, more comfortable living spaces due to lockdowns and work from home practices. Landscaping, remodeling, and “stay at home” products and services are in demand:
- Virtual Meeting Services, Zoom
- Home Workout Equipment
- Online Streaming Services
In the automotive space, EV stocks such as Tesla, Nikola, and NIO have seen their stocks soar this year.
Another red-hot market – used car sales.
Used Car Sales – Booming
According to Statista, the U.S. market for used vehicles, light trucks, and automobiles was 40.8 million units in 2019. After an initial COVID-related slow-down in March, the market has rebounded dramatically. This summer’s sales were up more than 20% versus the year earlier. That trend continued through the fall: August and September posted the fastest used car inventory turnover rate in 6 years, according to Edmunds.com.
Despite the pandemic, people want and need to own cars for basic transportation. An automobile is most likely the second most costly asset you purchase, and this year we’ve seen the perfect storm for used car sales as demand outstrips available supply.
In some states, dealer inventories are so low they are running ads and cold calling people asking if they’d be interested in selling their vehicles. Since many people aren’t traveling as frequently, driving miles in the U.S. were down in several months during the height of the pandemic close to fifty percent; some owners are cashing in.
Prices are reflective of this supply and demand issue.
Used Car Prices – Off the Chart
How much have prices risen? According to the Manheim Used Vehicle Value Index, we’ve seen a 15.3% price increase from December 2019.
Manheim Auto Auction Used Vehicle Index
Typically, over time used-car values decline due to depreciation. But in this crazy year of 2020, used cars are appreciating. Even month-to-month prices are rising, particularly on pickup trucks, sports cars, and SUVs.
Why Used Car Sales are Booming
As we said, this has been a most unusual year for used car sales. Factors contributing to this increased demand:
- For months, the inventory of new cars was depleted as auto manufacturers, and parts suppliers were forced to close
- People are avoiding mass transit
- Some people used their federal stimulus checks
- People have reduced their spending during COVID and have available funds
- Falling interest rates
People are Buying Used Cars Online During the Pandemic
The pandemic has changed the way people shop. People who previously never shopped online now purchase virtually all their needs, including groceries, on the internet. People are avoiding dealerships and now shopping for used vehicles online, too. Many have realized there’s no reason to shop in person and like the idea of avoiding the high-pressure sales tactics and negotiating process at the dealers.
Why drive to a car dealer’s lot when consumers can now find a greater variety of used vehicles online? Carvana, True Car, Car Guru’s, and Autotrader make the online process simpler and more palatable to a broader range of customers. They list cars with custom features and can ship vehicles from virtually anywhere in the U.S., across state lines.
Dealers are refining their digital efforts with more sophisticated websites, walkaround technology, and contactless features such as offering test drives and delivery to the customer’s location. And dealers still have the benefit of being able to provide a service department.
The Coming Months – The Tipping Point for Used Car Sales
Usually, we’re not proponents of procrastinating; however, if you’re able to delay making a purchase now, better deals and more variety may be coming back soon, as inventory is replenished. Rental car companies experiencing business declines due to travel restrictions are looking to reduce their fleet inventory. Dealers granted lessees an extension during the pandemic, and those vehicles will be returning to dealers shortly.
Industry experts predict we’re near the tipping point in the used car market. They anticipate that as this increased supply of newer off-lease and rental cars hit the market, retail prices will start to moderate. By delaying, you may save a few bucks and have your choice of newer vehicles with more desirable features and updated technology.
One thing we never suggest you delay is replacing or repairing a cracked windshield. It can be dangerous and against the law. Companies like SunTec Auto Glass of Phoenix, now provide same-day mobile windshield replacement – a convenient reality for customers. Auto glass specialists have refined their services during the pandemic as well, offering virtually no human interaction.
No matter if you need a windshield replacement or you’re ready to purchase a used car, the automotive industry has stepped up to assist customers during these turbulent times and will continue to adapt into 2021 and beyond.