The unprecedented events that have occurred in the year 2020 – namely the coronavirus pandemic – were a shock to the entire world. Schools and businesses shut down, causing the economy to take a hit. However, this period of uncertainty gave way to a surge in the buying and selling of new and used cars.
Used Car Sales in Demand
With automotive manufacturers on lockdown in April and May due to shelter-in-place and social distancing orders, the number of new cars hitting dealer lots significantly dropped. This resulted in skyrocketing used car sales. This trend has continued through the summer and fall. In fact, August and September posted the fastest rate of used car sales in the past six years, according to Edmunds data.
Edmunds data also shows that the average listing price for all used vehicles increased to $21,558 in July, marking a $708 increase compared to June. Edmunds experts note that this is an unprecedented historical shift in the used car market, where listing prices typically decrease during this time period because of depreciation.
“We're seeing evidence of more typical new car shoppers gravitating toward the used car market than usual during the pandemic due to a combination of factors: Consumers are being more financially responsible, interest rates and CPO offers have been extremely favorable, and inventory has been severely limited on the new side,” said Edmunds’ Senior Manager of Insights Ivan Drury. “Shoppers might be a bit surprised to find that prices are ratcheting up on used vehicles because of significantly increased demand.”
New Car Sales Trending Upward
Although Q1 new car sales fell 12.8 percent from the year prior and Q2 sales fell 33.7 percent due to impacts from the COVID-19 shutdowns, experts say new car sales began trending upward in the beginning of July.
“Consistently lower interest rates encouraged new car buyers — who were less likely to be financially hindered by the economic fallout of the pandemic — to pull the trigger on a purchase,” said Edmunds’ Executive Director of Insights Jessica Caldwell. “Rising used vehicle prices also likely made the new car market more appealing for shoppers on the fence between the two.”
Predictions for Car Sales in 2021
While used car sales have increased and new car sales were reported to be trending upward in Q3, one potential issue that experts are predicting for 2021 is the availability of new vehicle inventory as a whole, according to Cox Automotive.
“Available Inventory is far below last year's levels, yet sales continue to show surprising strength," said Charlie Chesbrough, senior economist at Cox Automotive. “Clearly, new vehicle buyers haven’t been hit as hard as other consumers during this recession, so demand is likely to remain stable over the near term.”
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