Used-car shoppers may have noticed a decline in selection, and higher prices on the vehicles that are available. There are a number of factors at play, but the bottom line for consumers is a tough market for used cars, and it’s just another situation you can blame on the pandemic.
Earlier in the year, as consumers pulled back spending, more people worked from home, and demand for car sales in general waned. Drivers ended car leases early and there was a glut of new cars and early lease terminations, with some larger dealerships running out of room to park them all.
Dealer auctions are the most common venue for new car dealers to clear out unwanted inventory and for used car dealers to stock up, but during the pandemic, most auctions went to a virtual platform.
A good auctioneer can read the crowd and adjust their cadence to the audience, selling cars and getting decent prices for their efforts. This can be a disadvantage when no live bidders are present such as when the auctions moved to an internet-based solution. Buyers are also less likely to step up when they can’t inspect the vehicle as it moves through the line. Used car dealers’ inventory began to suffer during this time.
In response, new-car dealers sharpened their deal-making pencils, sweetened their finance options and offered higher prices for used-car trade-ins to keep new-car inventory moving. This had the effect of raising used-car prices at the wholesale level, forcing prices to rise on the consumer side, exacerbating the auction situation.
Manufacturing plants halted production this spring for about two months while the world came to terms with the coronavirus, but the shutdown coincided with the drop in demand so the effect wasn’t felt immediately.
It wasn’t just automotive facilities; parts and component manufacturers and suppliers also shuttered during the uncertainty. That’s a long pipeline of tightly scheduled logistics that is still stumbling as it gets back on line.
The demand for resources on assembly lines also put a squeeze on parts availability for service and repairs, and the entire industry is feeling the pinch. Some drivers with problematic vehicles chose now to get into a more reliable or newer vehicle.
New-car selections became limited as a result of the spring shutdown, and dealers ceased offering bargains on their inventory. But as businesses reopened, many families found the need to have another vehicle. In larger urban areas, particularly, demand for cars has been brisk, mostly due to concerns regarding the spread of COVID-19 when using public transportation and ride sharing.
Unstable job markets and economic uncertainty brought on by the pandemic concerned buyers enough to avoid pricey new cars. With the average price of a new car in 2019 just shy of $39,000 and the average price of a new pickup hovering around $50,000, purchasing a used vehicle for a commuter or second car made more financial sense than buying new.
All these factors have caused used car prices to rise a staggering 16 percent over the summer and sales have shot up 22 percernt over last year. New-car dealers aren’t immune to marketing what sells, and many are holding back pre-owned vehicles they used to send to auction in favor of selling them on their own lots.
Cars that were a bit too old or higher mileage than they preferred are now more attractive and can help fill the gaps in new car sales.
Fewer cars on the wholesale side means even higher prices, and slim pickings among used-car inventory for smaller used-car dealers. Additionally, with fall and schools reopening, there’s a typical seasonal spike in demand for cars and, going into winter, that demand will remain steady or even rise, putting more strain on the car market and keeping prices high and inventory low.
Eventually, the market will even out again, but outside factors can still influence that timeline, such as a resurgence in the virus as cold weather forces more people indoors, which could also stifle manufacturing while demand remains strong.
Winter weather also can have a negative affect on vehicles, including exposure to salt, leading to rust and rot and poor driving condition related to inclement weather, along with road hazards like potholes and frost heaves.
For now, keep your car maintained and serviced. Invest in some decent winter tires and a strong battery or plan to spend more for a new or new-to-you used car.
Eric and Michelle Meltzer own and operate Fryeburg Motors, a licensed, full-service automotive sales and service facility at 299 Main St. in Fryeburg, Maine. More than a business, cars are a passion, and they appreciate anything that drives, rides, floats or flies.