he scene of the whole world is changing and the automotive part of that world has been shaken in the process. Coronavirus or Covid-19 has swept through the globe with reckless abandon faster than a Ferrari with a jet engine and has affected some of the largest parts of the industry. Even the Geneva motor show, a huge part of debuting the most polished and pristine examples of advanced autos in the world, was canceled for the first time in nearly 70 years. The impact across the industry is vast. Dealership sales models are being adjusted all over the country as everyone tries to get a better grasp on what we're in for. One dealer in the southeast United States told VINsmart "It's grinded to a halt". Here’s a behind the scenes peek at what is actually happening inside the automotive industry and how you can take full advantage of those market adjustments to help your customers score a killer deal on their next used car.
What can Dealers Expect?
To begin with, it’s becoming more and more clear that new car sales are going to struggle this year thanks to Covid-19. For example, Chinese auto sales dropped more than 21% in January and then fell 80% in February when compared to last year’s sales numbers. While dealerships across the United States were still fairly busy last week, we’re going to see fewer and fewer willing to go out and shop in person as the disease continues to make its way through the population. Even those who may not have the virus are unlikely to be making their way to dealerships as they’re likely following the direction of the CDC and other governmental organizations that recommend social distancing and staying away from heavily populated areas.
Workers all across the nation have been asked to stay home too. Most businesses have been operating with only the bare minimum of employees wherever possible. That means that millions will be making far less than they did before the outbreak. And while it may be true that many states have been working hard to come up with new ways to supplement that lost income we can be sure that overall there will be a dramatic drop in general earnings across the country. That lost income will be just one of the pangs of distress that new car sales will see. The next will be when it comes to the actual production of cars.
While most major automakers like Chevrolet, Toyota and Dodge do make the majority of their vehicles on automated factory lines, humans are absolutely integral to parts of the process. Some do extensive quality control during and after production. Testing can only be completed by humans who pick up on things that machines can’t. Still, other workers are responsible for placing machines in the correct places and finishing their work. Quite simply, manufacturers will struggle to build as many cars without the manpower they once had. Segments like trucks will likely do the best but expect specialized cars and fleet vehicle sales to be way down. Some estimates are predicting a 40% drop in new car sales if worst-case scenarios take place.
Finally, OEMs are going to assist dealers in every way they can. Some evidence of that is seen in the way Hyundai, Chevrolet, Subaru, and Ford are making major adjustments already. Hyundai is reinstating a policy they used in 2009 that assisted all new customers by making up to 6 months worth of payments for them in addition to offering 0% apr over 72 months. General Motors is offering 0% over 84 months and offering to defer payments for the first 120 days. Ford is launching a program they’re calling “Built to lend a hand” which similarly allows the delay of payments as well as offering to delay the first payments for new buyers. Subaru is even offering free delivery within 500 miles and "Test Drives" via video chat.
Making The Best Of A Bad Situation
Overall automotive sales are still predicted to be good though thanks to used cars. While new car sales are expected to drop off dramatically, at the same time, we can expect used car sales to grow far beyond initial expectations. This time of the year is a boom to the automotive sales industry called the “Spring Market”, especially with cars that are $10,000 or less. The Black Book used vehicle retention index has seen .3+ increases in used vehicle values over each of the last two weeks but only time will tell if those values can sustain and overall balance. It would seem that while some will maintain their values that overall the market will lower in terms of overall value. That will equate to outstanding deals across the country that you can take full advantage of for two reasons.
First, we know that competition drives prices down. When there are few options, dealers and private sellers aren’t inclined to lower their prices much if at all. They know that they hold most of the cards because anybody looking for whatever model they have is going to have very limited options. Thanks to this boom in used car sales we can expect a much deeper market. That deeper market will feature far more cars to choose from which will, in turn, require sellers to lower prices to make their offerings the most appealing. When customers find a car they really like they won’t be afraid to keep looking. The chances are great that there will be more than one other similarly priced and optioned car.
Additionally, the Federal Reserve recently lowered interest rates to almost 0%. That means that banks will have the ability to turn around and offer similarly low-interest loans to small businesses and families as a kind of lifeline while we wait for this to blow over. It is beginning to become clear that this virus will indeed leave a long term effect on the world. So combatting that with a source of some additional capital will soothe the anxiety of many and offer all another option when it comes to handling life until things get back to normal.
Practical Tips For Buyers
Expect used car dealers to take full advantage of that interest drop to help you get into a car whenever possible. Additionally, educate yourself about what the competition is offering to the point that you don’t allow anyone to overcharge you with a wild interest rate. Knowledge is power and knowing deep down that the bank is being charged almost nothing to borrow the money empowers you to get the best rate too.
So don’t lose out in this market that favors car buyers in many ways. When you find one you’re especially interested in, take a look at its history with a VIN check. This allows you to stay home, stay safe and know one of the most important things you can about a car; its service history. That service history can be a complete game-changer so don’t leave home without it. The cheapest Ferrari is often the most expensive one old adage goes. The point is that sometimes the best looking deal can cost you far more in the long run because there’s a reason it was so cheap to begin with. You have all the insider info now, go out and conquer!