In those halcyon pre-pandemic days, pundits predicted that ridesharing and ride-hailing would bring the demise of personal car ownership as we know it. But COVID-19 put the kibosh on that meme for the foreseeable future, and instead piqued consumers’ interest in cars and light trucks, both new and used.
To be sure, when the virus appeared this past March and April, vehicle sales cratered: Many dealers closed showrooms, assembly lines shut down, and consumers sheltered in place. Automakers attempted to lure virus-shy buyers with interest-free financing and astonishingly long 84-month loans.
Then around May, the lockdowns eased, and consumers who still had income started kicking tires on car lots again—in part because the virus had made sharing cars and public transport with other people seem unsafe. And with summer coming, a road trip in one’s own vehicle seemed far more appealing than air travel or an ocean cruise.
This year started with below-normal inventories at General Motors’ dealers because of a labor strike in 2019. And two months of factory closures for nearly every automaker this past spring meant new vehicles were in short supply when demand picked up in the summer.
In fact, Automotive News reported that August dealer inventories were the tightest in nearly a decade. And as demand persisted and inventories diminished, so did those generous sales incentives. New-vehicle out-the-door prices rose 7 percent this year compared with those of August 2019, according to J.D. Power.
The lack of new cars, as well as anxiety about personal finances amid the pandemic, sent consumers looking for used cars. Many cars had come off leases in spring and early summer. As a result, it had been expected that car shoppers would be able to get good deals. That was true in April and May, but by midsummer, the unexpected demand confounded predictions yet again.
Dealers ran out of used cars, too, according to Tyson Jominy, J.D. Power vice president of data and analytics. “By every metric, 2020 has been a wild ride,” he said. Reuters reported the largest jump in used-car prices in five decades during August.
Incentives may get more generous
So where does all this leave car shoppers in late 2020? The good news is that tight inventories are loosening as production ramps up. In September, automakers were offering an average incentive of some $4,000 per new car.
And, since new-car introductions were late this year because of interrupted production schedules, incentives may become more generous by year-end as automakers look to maximize sales totals.
New model-year introductions, along with close-out sales of previous model-year vehicles, typically occur in the fall. But last spring’s factory shutdowns delayed both events by a couple of months. All of which leads Jominy to think that shoppers could find good deals between Black Friday and New Year’s Day.
But the best deals depend on the market segment. Pickup trucks and SUVs are outselling cars three-to-one this year, according to J.D. Power. That means shoppers are likely to find good deals among cars, especially midsize premium sedans, such as Mercedes-Benz E-Class and BMW 5 Series cars, says Jominy.
He adds that shoppers are likely to get better deals on compact SUVs, such as the Ford Escape or Honda CR-V, rather than on hot-selling small SUVs such as Ford’s EcoSport or Honda’s HR-V.
As for popular pickups, forget about great deals. “You’ll need to take out a home equity line of credit to afford one,” he says.
Peter Bohr has been writing about cars for more than four decades.