With 2020 more than halfway over, many of us have set our sights and hopes on 2021. I mean, surely next year can’t be as bad as this year… Right?
Car buyers, meanwhile, are looking in the opposite direction. They’re directing their interest and buying power toward last year’s model—and the model before that, and before that.
Yes, in the year of COVID-19, used cars are where it’s at.
“Sales of used vehicles in the U.S. have roared back after dropping 38% in April, when states were shut down and some dealerships were forced to close. In June, used-vehicle sales rose 17% above the pre-pandemic forecasts, according to research firm J.D. Power.
A confluence of factors is drawing buyers to the used-car lot. Some have used federal stimulus checks on their purchases, dealers and analysts say. Interest rates have fallen during the pandemic, to about 4.73% on average for a 36-month used-car loan, from about 5% in early March, according to Bankrate.com.”
The heightened demand has led to an increase in used vehicle value, providing a lifeline for dealerships at a time when new cars are difficult to manufacture and sell. Moreover, some dealers have been able to boost their margins:
“The average wholesale price in June likely will finish at an all-time high of more than $14,600, according to Manheim, which has tracked an index of used-car values since the mid-1990s.
The retail prices that buyers pay at dealerships have been more stable, declining only 3%-5% this spring before recovering. That means dealers who were buying used cars from auctions on the cheap in late March and April enjoyed unusually big profit margins, said Jonathan Smoke, chief economist at Cox Automotive, which owns Manheim.”
Don’t expect the surge to last for much longer. Experts quoted the article anticipate that used vehicle demand and prices will fall in the next few months as rental-car businesses “purge their fleets” and the ends of grace periods for late vehicle payments force lessees to return their cars.
For now, though, it’s open season on used vehicles. Get out there and start selling. You can count on KPA to keep your team safe and compliant.