COVID-19 Has Car Dealers Flipping The Script
Have you received an unexpected call yet from your local automotive dealer asking to buy your car? Yes, you heard right - dealers are flipping the script and aggressively seeking consumers that wish to sell their personal cars. These campaigns are born out of the serious need for inventory.
It is hard to believe that it was just one year ago that new car production came to a screeching halt as the Coronavirus hit car manufacturers hard by mandating plant shutdowns.
The result? Unprecedented low inventories of new vehicles across the globe; yet another disruption brought on by the pandemic. As dealership lots across the nation remain sparse, the seller’s market of used cars that emerged last summer remains strong and steady and, according to the experts, the trend will likely continue. Bottom line, it’s a simple case of supply & demand. The demand for used cars is high and supply is low which drives pricing higher. So much so that auto dealers are reaching out to consumers offering them top dollar to purchase their vehicles just to have something to sell.
In fact, the used car market realized its largest pricing spike in history during the pandemic leading to record-breaking used car sale prices in the midst of the shutdown according to Michelle Krebs, Executive Analyst at AutoTrader in an interview by ABC News.
Though the used car market had been enjoying a steady climb for the last several years, the drastic shortage in new car inventory brought about by COVID-19 drove the demand for used cars even higher. Krebs says ‘since the manufacturers were unable to churn out new cars, the consumers weren’t trading cars and it caused a stand still which drove pricing higher.’ The average price of a used car climbed to over $21,000 during 2020 with the largest increase in the SUV and light truck categories according to Edmunds.com.
But wait, there’s more. In June consulting firm ALIX Partners estimated that the pandemic shutdown will cause a long-term ripple effect for new car sales. They forecasted due to full auto factory restarts and decline in consumer confidence that new car sales would drop by 36 million globally in 2022 compared to 2019.
As car manufacturers play catch up, according to IBISWorld, “online Used Car Dealers are Poised for Growth over the next five years, albeit at a slower pace than the previous five-year period. The factors driving this growth are an increase in per capita disposable income, and more widely available access to credit that will encourage more consumer spending, especially on big-ticket items such as cars.” Need proof? Check out Carvana, the leading online used car dealer. Just a year ago their stock was at $30 and today it’s over $260!
Further evidence of used vehicles being a hot commodity from a recent Automotive News report is the growth of used-vehicle loan origination market share for Near-prime customers, with scores of 601 to 660. And while low credit buyers were harmed by economic damages in the fourth quarter, there is hope on the horizon for all consumers in 2021. With innovative FinTech solutions designed specifically for the independents and online retailers, there is no better time to ensure that dealers dedicated to the used car market will be able to effectively compete with the big boys, capture business and get customers driving.
One of the most robust programs to facilitate quick & seamless financing for used car dealers is from AutomaticUSA as the name implies, it provides automatic loan processing for an exceptional customer and dealer experience. You can check them out at www.AutomaticUSA.com.
So our advice is to buckle up, get the right tools in place and get comfortable with this spike in the used vehicle market. It looks like we can ride this boon for a while.