Traditionally the kick-off for summer, the Memorial Day Holiday anchors one of the biggest weekend car sales events of the year. But with some states emerging from the lockdown and others observing stay-at-home guidelines, what can car shoppers expect this year?
Related: 10 Best Memorial Day Car Deals
Here are some factors to consider as determined by analysts at KBB affiliate Cox Automotive Rates & Incentives (CAR&I):
Reduced Memorial Day travel, more car shoppers?
Memorial Day Weekend is a travel holiday, but fewer people expect to be flying. Road trips may be up, but with fewer restaurants and attractions open, little in the way of professional sports and concerts being held, it’s likely many will stay home. According to Brad Korner, generation manager of CAR&I, “That’s a big positive for car dealers – local businesses open and ready to serve customers. Many employ social-distancing tactics and are, for the first time, offering vehicle delivery and heavily focused on digital sales. At last count, more than 11,000 dealers are now offering Dealer Home Services from Autotrader and Kelley Blue Book.”
More shoppers may be good for dealers, but there may be a scenario unfolding where there are more buyers chasing fewer popular new models.
Factory shutdowns ending, but inventories are tight
Automotive assembly plants are just now beginning to restart their production lines after an 8-week hiatus. Cox Automotive data shows that less than 3.3 million vehicles are in stock, the lowest volume in more than a year. “Low inventory means less choice for consumers, particularly with popular vehicles like pickup trucks and SUVs,” Korner observes. “Available vehicles are likely lower trim levels, as the upper-level vehicles were scooped up with 0-percent deals last month.”
Popular vehicles that were in short supply before the shutdown will remain difficult to find not only this weekend but in the weeks ahead. You might find the biggest offers on 2019 model year closeouts.
Used car supply brighter
Shoppers will find a better selection among used vehicles. While both new and used retail sales fell in late March and April, used vehicle activity is up in May. Even as used vehicle sales climb, the Manheim auction team at Cox Automotive, reports that inventories are about 40 percent higher than normal.
A pro tip is that if you can’t find that new vehicle you want, a late model Certified Pre-Owned model might just fit the bill.
Incentive availability mixed this Memorial Day
Manufacturers instituted across-the-board programs like 0-percent financing for up to 84 months at the height of the shutdown. However, these broad offers are on the decline. More traditional rebates and lease deals on selected models are now in place. So while the headlines focus on 0-percent and payment deferrals, you need to dig down to find the best deal.
Part of that drilling down involves a visit to the manufacturers’ websites. Don’t forget to enter your zip code to find out what specific deals are available in your area. It’s here where you’ll also find conditional incentive offers to first responders and military families. Some give $1,000 extra cash for qualified buyers.
Interest rates still high for less qualified buyers
Although the Federal Reserve has lowered rates and manufacturers tout 0-percent deals, most low-interest rates go to highly qualified buyers. The lower your credit score the higher the interest you’ll pay. According to Korner, “the 0-percent deals, which accounted for 21-percent of sales last month, are available only for buyers with the best credit scores. Shoppers with lower credit scores, subprime buyers, are often getting little support in the market.”
When it comes to financing, online research before shopping a dealership is a good strategy. Check first with your bank or credit union and prequalify for a loan. With that rate in hand, see if the dealer can beat it or offer another discount if you don’t qualify for the factory-backed rate.
The bottom line
Overall, automakers have not pulled out the usual stock of blow-out-Memorial Day deals. Still, there are good incentives in place to pull shoppers into dealerships during the second half of May. And with significant pent-up demand, there’s reason to believe Memorial Day Weekend may be a good one for dealers in many parts of the country. Tight inventory will keep incentives in check. As a result, some buyers will steer towards used-vehicle lots. How well the Memorial Day Weekend unfolds on the sales front will likely set the tone for what’s to come in the second half of 2020.
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