Layoffs, stay-at-home mandates and the closing of non-essential businesses as a result of the spread of the COVID-19 coronavirus roil the nation. Not surprisingly, the automotive industry faces its own upheaval. Production is suspended as companies and states order workers and the public to stay at home. And while there are still plenty of vehicles for sale on dealer lots, many showrooms are closed. For those remaining open, sales suffer as potential car buyers heed warnings of social distancing by distancing themselves from car dealerships.
Coronavirus’ effect on car sales
As new-car sales predictions begin to take shape, what looks to be certain is that this year’s numbers are down. Before the outbreak, new-car sales targets for 2020 were around 16.7 million. Now, estimates are below 16 million, and possibly under 14 million in a more negative scenario, said Jonathan Smoke, chief economist at Cox Automotive. Cox is the parent company of Kelley Blue Book.
“This downturn is first and foremost all about the coronavirus,” Smoke said in an industry briefing this week.
Fears that the U.S. is headed towards a recession follow news of unemployment claims exploding to a record of nearly 3.3 million. “The extent of the shutdowns, declining consumer confidence and job, and income losses point to the U.S. and most of the world heading into a recession quickly,” Smoke said.
Stimulus attempts to spur the economy
Some hope floats. The government’s $2 trillion stimulus plan looks to put money in the pocket of working Americans. Most individuals get as much as $1,200. Hundreds of billions more in loans and grants go to help businesses get back on their feet.
And while the stock market rides a roller coaster, the prospect of the stimulus package helped it gain back some of its big losses. As always, a recovery is expected, but when and how long it will take is still murky.
“There is a chance that the recovery will be shaped more like ‘V’ or a ‘U,’” Smoke said. “A downturn followed by a recovery later that gets us back to what we’ve seen, if not stronger.”
However, he cautions that “What is clear now is the depth of the decline will be deep, and the declines are happening much quicker than in a normal recession.”
Silver linings for car buyers
Yet even in circumstances such as these, life goes on. And for most Americans, it centers around their transportation mode of choice: cars. Which means vehicle sales will and must continue.
A bright spot for consumers is the price of oil. It’s down to around $25 per barrel, from as high at $60 just over a year ago. Lower gas prices mean that demand for full-size pickups, once the market recovers, may not slacken. This is good news for GM, Ford, and FCA, which derive much of their profits from these trucks.
Deals await
If you’re in the market for a car or plan to be soon, there are deals to be had.
“In terms of incentives, now is a great time to buy a car, especially for consumers with a prime credit rating,” said Michelle Krebs, executive analyst at Cox Automotive. “Zero percent deals up to 6 or 7 years abound from numerous automakers along with a number of other perks, like delaying the first payment for three months or getting help in case of a job layoff.”
And while most automakers have idled their factories, that doesn’t mean cars aren’t available for sale.
“There’s also ample inventory on the ground that isn’t moving,” Krebs said. “There just won’t be anything fresh from the factory as virtually every auto plant in the U.S. and in many other countries are closed for some weeks.”
Online shopping alternatives
Even if you cannot go out today to buy a new car, know that most of the process can be done online. This begins with researching and finding the best vehicle for your needs at sites like KBB.com. You can even start the sales and financing process online. With so many Americans sequestered at home, now is an ideal time to get that process started.
And for sales operations that remain open or are set to open soon, you can be sure they will be ready to bargain. As Krebs notes, “Dealers are hungry to make a sale if they can figure out how to do it.”
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