The automotive industry has been affected by the coronavirus pandemic much differently than past economic downturns. Many people have put off buying a car due to stay at home orders and fears of the virus. Many factories temporarily closed, leaving popular models in short supply. With a decline in supply, the great deals in the car market now may not last long.
Possible New Car Shortages
In April, the market showed signs of life after a sharp drop in sales in March. But car buying, in general, may be changing. First, there is the question of availability. Automakers have seen extreme disruptions. When a worker tested positive for COVID-19 at an assembly plant in Kansas City, Ford halted production there. Even after restarting on May 18, the company shut down its Chicago Assembly plant twice due to coronavirus issues. On May 21, it shut down its Dearborn Truck Plant in Michigan after a worker tested positive for the virus.
McLaren plans to cut over a quarter of its workforce as part of a restructuring plan. General Motors announced it would begin gradually restarting its transmission and engine lines in Mexico by late May.1 Nonetheless, declines have been reported worldwide, especially in Malaysia, Indonesia, Thailand, and other Asian markets.
Low inventory can mean:
- Manufacturer incentives, including rebates, low-interest rates, and lease deals, will be scaled back.
- A limiting of payment forgiveness, deferrals, and zero-percent finance deals.
- Greater difficulty in negotiating a price on a model in short supply.
What’s Popular and What’s Not
Pickup trucks and SUVs remain the most popular vehicles, even during coronavirus lockdowns and a sharp drop in sales across the board. In April, pickup trucks were the best-selling category and outsold traditional cars for the first time. The lowest inventory numbers are being seen with Kia and Subaru. Kia only recently resumed production at its Georgia assembly plant but it’s operating only on one shift. Subaru is experiencing a shortage of Outback and Ascent models.2
Sales of small vehicles are down and many brands are struggling with slow sales and high inventories. Cadillac, Buick, Jaguar, and other luxury brands are likely to offer more incentives in the coming months. But if there’s a specific model you want and it’s in short supply, the used vehicle market is the place to look. It’s a good time for used car buyers, as wholesale values have dropped (amid lackluster sales), supply is abundant, and many off-lease vehicles are expected to be returned.
Great Alternative: Buy a Used Car!
While the current trends mean bad news for sellers, you can get a great deal if you buy a used car. Prices have plummeted and aren’t expected to recover until later this year. Supply is expected to outpace demand, providing a window to get a great deal on a used vehicle from mid-May through mid-July.
At CarWorld, we have an abundant supply of low-mileage used models. Our Hawthorne Buy Here Pay Here (BHPH) dealership remains open during the crisis and we’ve implemented a COVID-19 response that involves adjusting our schedules and operations accordingly. We are committed to keeping our staff and customers safe while continuing to serve you. If you are in the market for a used car, we can value your trade-in, get you approved for a loan, and help you choose the right vehicle.
Visit us today or call 833-219-9951 to speak with a friendly representative or set up an appointment.
Sources:
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https://www.just-auto.com/news/updated-daily-automotive-coronavirus-briefing-free-to-read_id194210.aspx
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https://www.autotrader.com/car-shopping/after-the-shutdown-car-buying-strategies-in-an-uncertain-market
