By Ray Birch
LAWRENCEVILLE, Ga.—While consumers are buying up toilet paper and hand sanitizer in response to the COVID-19 pandemic, auto dealers are loading up on used car inventory.
That's the word from Black Book, which told CUToday.info auto dealers are packing into wholesale auction lanes to scoop up as many used cars as they can before showing up at the sales in person becomes unadvisable or not permitted.
The result: An increase in the values of used vehicles.
“The auctions have been just a hot place to be right now as dealers are serious about loading up on used inventory,” said Laura Wehunt, vice president of automotive valuation. “They have been packed. We are seeing dealers really buying now, and they are willing to pay up to get good inventory.”
Wehunt speculated the moves are in advance of wholesale auction lanes going to “postcard” sales, due to coronavirus, where buyers can’t see cars up close and touch them. Instead, vehicles at the lanes are shown on video screens, with dealers watching the sales via video from their offices, she said.
‘A Really Good Week’
“Used prices really went up (last week), and some of it too is due to low interest rates, low gas prices and people having extra money from their tax returns,” Wehunt said. “For people who were selling used cars last week, they had a really good week. This situation may continue for a while, but we are not certain.
Laura Wehunt
“It’s hard to say how long-term this situation will be, the postcard sales,” Wehunt continued. “Will they be just a short run after they begin? Will they go on for several months?”
Overall, it’s wait and see on where used vehicle values will go due to the effects of COVID-19 on dealers’ habits and on the economy, emphasized Alex Yurchenko, SVP of data science at Black Book, who also shared concerns for lending volume.
Some analysts are forecasting new car sales will drop by at least $1.5-million units this year, over 2019, due to the COVID-19.
“Our lenders are concerned the virus will push the country into a recession,” Yurchenko said. “Looking at used car prices, a lot obviously depends on the economy. There are a lot of factors, including how manufacturers will handle incentives on new cars going forward. Will consumers have the confidence to buy new cars? Will they turn to used cars more if the economy turns downward. A lot remains to be seen.”
No One Knows What Will Happen
Alex Yurchenko
But Yurchenko also said if COVID-19 interrupts the automotive parts supply chain, it will become more difficult to repair used cars, which might reduce their appeal with consumers for a while.
“I don't think anyone knows what's going to happen,” said Yurchenko. “I think everyone's looking at worst-case scenarios, best-case scenarios and something in the middle. I'm just waiting to see.”
Yurchenko added, however, the biggest effect on auto sales of any kind from COVID-19 will be consumers’ outlook on the future.
“Consumer confidence in their own balance sheets and in the economy will play a major role,” he said.