Used in 2021
In the optimistic early days of 2020, analysts expected the used car business to lose little sales volume versus 2019: approximately 39million unit sales were forecast. And then…well, you know.
Amid the pandemic, there were lows—runaway negative equity caused by cratering wholesale values this spring—and there were highs—average list prices topped $21,000 multiple months in a row in Q3 and Q4. Remarkably, used vehicles are expected to close the year with around 38 million units sold—a testament to the strength of the auto recovery this year. Experts are making their predictions for 2021 now that the dust is settling: here are a few key factors to watch in the used auto market in the new year.
More Americans See Value in Ownership Amid the Pandemic
At the start of 2020, talk of ridesharing and autonomous technological advancements had already generated a lot of headlines about the viability of personal vehicle ownership in the future. Once the pandemic hit the US, however, it heavily impacted how people commute, run errands, and vacation. A study commissioned by Ally Financial this fall revealed that a vast majority of respondents see owning a vehicle as essential to their daily lives, whether they have many places to go or not. (Over 50% said their car is their place to clear their head and get away for a little while: many of us can surely relate to that!) Aversion to public transit, carpooling, and generally being in close quarters with people outside their bubble(s) will continue to shape attitudes—and shopping plans—toward car ownership into 2021. As new vehicle prices hit new record highs in 2020 and the gap between the wealthy and middle and working classes widens amid the economic fallout, used vehicles are in prime position to catch shoppers’ attention in 2021.
Price Gives Some Pause
Even as more buyers with higher credit scores opt to shop for used vehicles—whether due to prices of new vehicles or lack of plentiful inventory—they may be in for sticker shock. The average list price of a used vehicle topped $21,000 for the first—and second, and third, and fourth—time this year. This is reflective of later-model and tech-heavy vehicles comprising a larger share of used inventories as well as the unprecedented rise in wholesale values this summer; older, lower-cost vehicles have been in short supply for a few years due to the events of the Great Recession. Used vehicle inventories are also coming up a bit short, with days to turn and actual vehicle counts both hovering below normal levels. These metrics show signs of improving in January 2021, but it remains to be seen how quickly buyers will feel the effects.
Fleet’s Collapse May Stymie Future Used Inventory
Among the auto industry’s largest pandemic casualties? Fleet sales. With rental demand plummeting as most Americans stayed home, fleets were not in the market for new units. While Hertz’s bankruptcy filing in spring made headlines—and generated analysis on how a flood of their inventory might further kick used values while they were down—their case has not had much of an impact yet. Analysts are now concerned that, with fleets not turning over their stock, the used vehicle resale market could be facing a serious inventory shortage of even late-model units over the next few years.
Is your dealership ready to capitalize on the strength of the used vehicle market? National Auto Care’s new Pre-Owned Plus program is designed specifically for used vehicles, offering excellent mechanical protection and benefits to keep your customers on the road and within their budget. Contact your Sales rep for details!