The Impact of new car sales on the used car market during COVID-19
October 8, 2020
It comes as no surprise to any of us in the industry that analysts are predicting one of the weakest years in new car sales in the last 15 years.
This is a global problem brought on by Covid-19 lockdowns that impacted the supply and demand of stock like we have never seen in our lifetimes. The downturn is also going to affect used car businesses across the country in terms of pricing, availability, and demand.
In one of the most unpredictable times our industry has seen, what exactly are the causes and outcomes we are seeing right now and what should we be future-proofing for?
In 2019 Aussies purchased just over 1.06m new cars, this figure is likely to be closer to 850,000 in 2020. This already comes after a 2-year decline in sales within the Australian new car market and the impact this has had on used cars have been both positive and negative for dealers throughout COVID.
Many dealers have adapted to changes quickly and continue to evolve their used car strategies in line with current market challenges.
New car supply has been greatly affected by many factors including International production delays and factory closures, border closures and rerouting of stock to different ports around the country.
Suddenly used cars have become an attractive alternative for someone who may have started their journey as a new car buyer. We know that online searches are up and that used car leads are remaining steady across dealer websites and 3rd party platforms; we just do not have required levels of stock that we are all so used to.
Dealers are reporting lower used car stock levels throughout the pandemic while at the same time we have seen a willingness of consumers to pay higher prices for used cars.
Not only that, a steady demand for lower priced cars has also been noted.
Consumers have been reacting to social distancing measures and have been searching for and purchasing used cars at a steady pace since around May.
Afterall, consumers do not see public transport as being the safest option during this time. We certainly saw May bounce back after a very sharp drop in new and used car sales when the country entered widespread lockdown laws in April.
Dealers have been able to ask higher prices on used cars throughout the pandemic due to reduced availability of stock, however, the biggest concern now is their inability to get their hands on good quality used cars at a price that delivers on gross profit.
Reduced trade-ins, private sellers’ willingness to used 3rd party sit to sell their cars and the higher than usual pricing through auctions and wholesalers means that dealers are having to get strategic around where they are sourcing their inventory.
New car supply and pricing will continue to impact the used car market for some time, maybe years. With the reduction in trade-ins and good quality used cars available, the price of used cars is likely to remain stable. However, within the next few months, as OEMs start to push new cars into the country, high priced late-model used cars will start to look less attractive for buyers when a new car can be purchased for just a few thousand more. This needs to be a big consideration for Used Car Managers, independent dealers, and wholesalers right now.
Today more than ever, dealers need to be looking at data and trends relating to their used car stock as well as making smart buying decisions that will not see them with overpriced stock once the supply and demand for new cars kick back in.
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About the author
Kylie Brewer | National Sales Manager Dealer Solutions & Digipurple
With over 20 years experience in the Automotive Industry, Kylie Brewer has a unique understanding of current market trends having worked in various leadership positions within Dealerships, Groups and Automotive classifieds. She has a strong knowledge of Digital Marketing specific to dealership needs as well as a good understanding of the used car market and how to retain and build gross across all dealership departments.