HOLLAND TWP. — The ongoing pandemic hasn’t been kind to retailers or the hospitality industry; but when it comes to used cars, business is booming.
According to Holland MotorMax General Manager Michael Posati, it all started with stimulus checks and increased unemployment aid.
“When they offered that $600 federal aid, we were having record months,” he said. “It was unbelievable, to be honest. I’ve been doing this for 25 years, and I’ve never seen anything like it.”
Typically, the busiest time of year at MotorMax is tax return season.
“This far exceeded that,” Posati said. “And for a longer period of time. Our sister store in Grand Rapids is still not allowing people to come inside and they continue to have very strong numbers.”
Due to a widespread inventory shortage, MotorMax has been forced to buy vehicles in states like Florida, Georgia, Texas and California — as opposed to its usual Midwestern purchases.
“It was difficult to buy them and difficult to transport them,” Posati said. “But we managed. For us personally, we probably sold between 250 and 300 cars per month between our stores after we reopened.”
At one point, demand jumped so high that dealerships began to call vehicle owners to ask if they were ready to trade in their used cars.
Why the sudden rise in demand?
Buyers are flooding the market looking for deals amid high prices for new vehicles, low interest rates and a shortage of new vehicle inventory, according to car-research site Edmunds.
The average listing price of used vehicles was $21,558 in July, up $708 from June.
“This is an unprecedented historical shift in the used vehicle market, where listing prices typically decrease during this time period due to depreciation,” Edmunds said in early August.
Automakers were forced to shut down plants for about two months in the spring due to work restrictions because of COVID-19. That led to a decline in new-vehicle inventory and a delay in 2021 models.
Used car price increases are especially sharp for larger vehicles, which are in high demand. Large pickups, for example, saw a $2,301 increase in average list price in July, hitting $33,264, according to Edmunds. Midsize trucks recorded a $1,812 increase to $29,457.
At MotorMax, customers weren’t necessarily focused on large vehicles.
“For some reason, there was a very strong focus on European cars,” Posati said. “We sold a lot of Mercedes and Audi and higher-end cars. I’d say it was 80/20 financing versus paying upfront.”
Not likely to last
The spike in demand isn’t likely sustainable long-term.
“In my experience, having worked through the recession and all of that, it was a false sense of financial security,” Posati said.
“To them, it felt like free money. But these payments are going to go on for five or six years, in some cases.
“So, right now, they might have a few thousand dollars to put money down on a car, but I think repossession rates are going to skyrocket in six months or a year, and that’ll be another can of worms.”
Posati added, as elections loom nearer, sales are nearing more normal levels.
“It’s back-to-school time and it’s an election year,” he said. “People are a little more hesitant. Reality starts to set in. And there are more places to shop now than there were in the beginning.”
— USA TODAY reporter Nathan Bomey contributed to this report. Contact reporter Cassandra Lybrink at [email protected]. Follow her on Instagram @BizHolland.