Consumers returned to dealers in the third quarter of 2020 to buy 30.6% more vehicles than in the second quarter in the immediate wake of the COVID-19 pandemic’s emergence, Edmunds forecast on Thursday.
Edmunds, a car-buying analytics company based in Santa Monica, Calif., forecast that U.S. dealers will sell more than 3.8 million new cars and trucks in the three months that end Sept. 30, 11% fewer than the 4.3 million sold in 2019’s third quarter but up from the 2.9 million sold in this year’s second quarter – the first full three months after COVID-19 was declared a pandemic March 11.
Jessica Caldwell, Edmunds’ executive director of insights, said the results show a positive turning point for the automotive industry despite challenges presented by the pandemic.
“Third-quarter sales make at least two things apparent: Most of the doomsday scenarios forecasted at the beginning of the pandemic fortunately did not hold true, and the American consumer stepped up to become one of the many heroes in this chapter of resilience for the automotive industry,” Caldwell said.
Lower interest rates were a major factor to trigger purchases, but also the fact that new-car buyers “were less likely to be financially hindered by the economic fallout of the pandemic.”
Data from Experian showed a shift in new car purchases toward people with higher credit scores.
Among credit unions, the average FICO score for those borrowing for a new car was 721 in the second quarter, down from 723 in 2019′s second quarter. Among all lenders, scores rose to 718 in the second quarter, up from 713 a year earlier, according Experian, an Irish company that provides credit reporting and marketing services.
Caldwell said rising used car prices were also a factor pushing people into the new car market. “And car owners also got to leverage the extra value that trade-ins are commanding during COVID-19 to offset the cost of their next purchase.”
While retail sales have improved, fleet sales have continued to struggle during the pandemic. Edmunds estimated that fleet transactions will account for 10.8% of total sales for the third quarter, compared to 17.2% in the third quarter of 2019 and 13.2% last quarter.
“Daily rental companies have understandably reduced or delayed orders as Americans continue to stay at home rather than embark upon business or air travel,” Caldwell said. “It will likely take a bit longer for this side of the business to make as dramatic a comeback as its retail counterparts.”
CUNA data showed car lending has been one of the weakest segments for credit unions this year. The balance of total car loans rose just 1.6% to $383.4 billion in July from a year earlier, while all other types of loans grew 9.1% to $785.6 billion, mainly fueled by exceptionally strong mortgage production.
Credit union balances for new car loans fell 2.9% to $145 billion in July, and used car loans grew 4.5% to $238.5 billion.