How widespread and how deep is the impact of the coronavirus pandemic is yet to be fully understood. The virus has disrupted many industries and heavily impacted all of mankind. The automotive sector is no different with heavy losses incurred for the three quarters of the 2020 financial year. Almost all manufacturers had to halt their production for weeks. The dip in demand combined with heavy losses also hiked the price of everyday vehicles.
However, not all things seem bleak. The used car market has seen the opposite effect due to the pandemic. Used car prices are up by a whopping 23% compared to pre-pandemic levels. SUVs and Truck prices are also up by 17%. Various reasons are attributing to this drastic growth in the Used car space. The used Honda HR-Vs for sale around the US saw the highest, 53% increase in the YoY sales figures and a skyrocketing 89% sales surge from April 2021 to May 2021.
In a period where even mobility companies like Uber and Lyft have incurred heavy losses due to the dip in ride-sharing by the public. As curfews have been lifted across the States, there is another problem that has slowed the new car market. The global semiconductor shortage has drastically cut down the plans made by automakers to bump up their productions. And this one of the plenty of other reasons that demand for used cars is at an all-time high.
One reason could be the influx of stimulus checks. The checks have improved the expendable income of many people. And as the pandemic rages on, most people are avoiding public transportation and instead of switching to a personal mode of transport. Another factor along with the stimulus checks could be the historically low levels of interest rates. The government essentially wants people to spend their money instead of holding it in order to keep the economy flowing and avoid any unnecessary inflation cycle.
Another factor could be the lack of new cars. Most automakers halted their entire production for weeks during the height of the pandemic. This has caused a sudden and drastic drop in the new car space. Thus, the major population flocked towards the used car market.
Even J.D. Power officials state that the used car prices have shot up way higher compared to pre-pandemic levels. They suspect that this trend will continue for another year or two. Also as consumer income reduced, their subsequent spending reduced. Due to this, they are hoarding in as much as they can. Thus, demand for used cars has gone up drastically and so are used car prices. J.D. Power officials stated that used car prices have rebounded strongly and now are above their pre-pandemic levels.
Another factor that has been driving used car prices up is the restricted flow of new cars due to the supply chains being disrupted. Another big factor that is driving the used car market up is the virus itself. Due to the highly contagious nature of the virus, consumers are skipping public transit and shifting towards personalized means of transport. Even ride-sharing services like Uber and Lyft have seen dramatic declines due to the same.
Even mobility companies like Uber and Lyft have incurred heavy losses due to the dip in ride-sharing by the public. Another industry that has been disrupted by the virus is the rental car business. These businesses typically refresh their entire stock every 12 to 18 months. As the virus hit, this entire industry was brought down to its knees. The businesses quickly stopped buying new cars and unloaded huge portions of their existing fleets.
Experts are guessing that this strong demand will continue to last until the vaccination drive reaches optimum levels and public health fears subside. There is another major behavioral shift in buying these used cars. There has been a digital acceleration of the used car space. Traditional auction-based sellers are not experiencing as big of growth as the digital used car space. Many new sites have popped up including a few online auction sites as well. This could be attributed to the highly contagious nature of the coronavirus.
How should consumers tackle the used car boom?
This drastic upturn in the market space has created lucrative opportunities for both the sellers and the buyers. However, the upturn is definitely in the favor of the seller. Due to the rising prices, the sellers have an excellent opportunity to curb their depreciation costs. According to data, the average list price in April 2021 was $21,522 which is actually 12% higher from the year before and 14% higher compared to the same month in 2019. So, if you want to sell your old junk, now is the time.
For buyers, the situation is a bit tricky. Most used cars have risen in prices, however, there are a few that have stayed relatively the same or reduced. These are cars that the rental businesses have shed. Due to their unloading of used cars, there is an influx of certain everyday cars resulting in the reduction of price. Buyers should target these cars and get a good deal of financing from the banks while the interest rates stay low.
Also, both buyers and sellers should take the advantage of online sites that have popped up over the last year. There are a lot of good deals and money to be made via these sites. However, be sure to double-check the website or any deal and make sure you thoroughly inspect any purchase before wiring your hard-earned or even the stimulus money.