How to Navigate the Car

Market During the

Pandemic
Prices are up and dealer inventory is low for both new and used
vehicles
by James R. Healey, AARP, August 20, 2020 | Comments: 0

IDRISESEN/GETTY IMAGES

If you're about to buy a car, watch out for the crash — not among vehicles on the road
but between expectations and reality.
Because of the economic downturn during the pandemic, about half of car shoppers are
expecting a hefty price cut, according to a study from Atlanta-based Cox Automotive,
which owns Kelley Blue Book and Autotrader.com among other auto businesses. Nearly
all buyers expect some kind of deal.
The same study warns that those shoppers “are in for a shock when they aren't able to
find the great deal that they expected.” Here's what they face: Prices are up, selection is
down and manufacturers haven't returned to 100 percent production.
To put a finer point on it, you will have a harder time finding what you want. And if you
decide to settle for something else, it still could cost more than you expected.

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"It's a weird time, all right,” says Ben Preston, auto reporter at nonprofit Consumer
Reports in Yonkers, New York. “The [auto] market has been changing every few weeks
since the pandemic hit. At first, the dealers that were open were bending over
backwards to help people — knocking thousands of dollars off, financing deals."
Now, well, this example from car-shopping service TrueCar.com, though extreme,
illustrates an about-face: “One customer we know was shopping for a Kia Telluride
[SUV], and the dealer adjustment [markup] on the window was $10,000 — if you can
believe it,” says Eric Lyman, chief industry analyst at Santa Monica, California-based
TrueCar.

Expect to pay a premium for popular models

The Telluride, starting around $32,000 before any markup, has been a hit since its
introduction about a year ago. It is one of the fastest-selling new vehicles, according to
a report from auto-data specialists at iSeeCars.com, based in Woburn, Massachusetts.
Smaller markups on Tellurides are not unusual, but ones that big are extraordinary,
TrueCar says. So if you're thinking about buying a car, your best move might be to wait.
When factories return to full production after closures in the spring, dealer lots will fill.
"It generally takes four to six months to adjust inventories on dealer lots” after new
vehicle production is seriously affected, as it was with the coronavirus pandemic, Lyman
says.

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Perhaps you can't wait. Maybe the old vehicle that has served you for a while is now
unreliable and unsafe.
"Cars don't decide to break when it's convenient,” says Alain Nana-Sinkam, vice
president of strategic initiatives at TrueCar. Or perhaps you previously didn't need a car,
but new circumstances now require one.
Short of buying, you do have some placeholder choices depending on where you live
and the size of your transportation budget: Ride-hailing services such as Uber and Lyft,
long-term car rentals, taxis, subways or other rail lines, and buses. If you do decide to
buy now, here are some strategies to consider.

Used vehicles limited

Pre-owned cars aren't the no-brainer they once were. “Demand for used cars is huge
right now. And the supply is tight,” says Preston of Consumer Reports.
You don't need an economics degree to know that high demand combined with low
supplies equals rising prices. Shoppers in the used market often gravitate toward
the so-called off-lease cars, typically turned in after three-year leases, or certified pre-
owned models that are low-mileage, late-model cars. The certified used cars typically
come with warranties and other extras that you don't get on most used cars.

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"Used vehicles were sitting almost untouched at the start of the pandemic. And
now they're practically flying off dealer lots,” says Jessica Caldwell, executive director of
insights at car-research site Edmunds.com in Santa Monica, California.
The pandemic caused economic uncertainty at the least and direct economic problems
at its worst. Thus many potential new-car buyers switched to used vehicles to save
money, especially to those off-lease or certified pre-owned models, draining that pool.

“Used vehicles were sitting almost untouched at the start

of the pandemic. And now they’re practically flying off
dealer lots.”
— Jessica Caldwell, Edmunds.com
"I found the sweet spot to be in the four- to five-year-old range,” Preston says. “I was
looking at 2017 models closer to 20 grand, so I started looking at 2015s and they were
closer to 15 grand. I thought, Wow."
Because older cars come with more uncertainty than newer ones, Preston suggests
checking a credible guide, such as what his publication offers, that uses data to forecast
which cars will be reliable as they age.
A possible silver lining: Dealers are willing to pay more to acquire inventory to meet the
surge in demand for used cars. That's great news for car owners.
They “can expect to get a higher value for their vehicle if they sell or trade right now,”
Caldwell says. “But time is of the essence because there's no guarantee that these
unique market conditions will continue for long."
So if you no longer need your car, now could be a great time to cash in on higher prices
by selling. Or if you do find an elusive sweetheart deal on a new or used car, your trade-
in should be more valuable than normal.

2019s you might find new

These models have a higher than average percentage of never-owned 2019 leftovers
still on the lot.
1. Dodge Grand Caravan minivan, 17.1%
2. Chrysler 300 sedan, 13.3%
3. Genesis G70 sedan, 11.2%
4. Mitsubishi Eclipse Cross SUV, 9.1%
5. Mitsubishi Outlander SUV, 9.1%
6. Dodge Journey SUV, 8.9%
7. Ram 1500 Classic pickup, 8.3%
8. Mitsubishi Mirage G4 subcompact, 8.0%
9. Buick Encore SUV, 7.6%
10. Mitsubishi Mirage subcompact, 6.9%

Newest of the used

These are the top models bought and resold within their first year.
1. Mercedes-Benz C-Class compact, 12.4%
2. BMW 3 Series compact, 11.8%
3. Land Rover Discovery Sport SUV, 11.8%
4. Land Rover Range Rover Evoque SUV, 10.9%
5. Mini Clubman subcompact, 10.7%
6. BMW X1 SUV, 10.4%
7. BMW X3 SUV, 9.0%
8. Nissan Versa Note subcompact, 9.0%
9. Jaguar XF sedan, 8.8%
10. Nissan Versa subcompact, 8.7%
Source: iSeeCars.com

Look for leftovers

You might be able to find never-sold 2019s, some identical to the “new” 2020 versions
on sale now. According to a new analysis for AARP by iSeeCars.com, 1.9 percent of all
vehicles remaining at dealerships are 2019 models. But some models have a greater
supply of leftover 2019s, so it might be worth beating the bushes to find if they meet
your needs.
The Dodge Grand Caravan and Journey are being discontinued. 2019 models of the
Genesis G70, Ram 1500 Classic and Buick Encore, which have 2021 versions in
showrooms now, are considered two years old, which can trigger increased incentives
from automakers.

Explore quick turnovers

Only 3.4 percent of cars bought new are sold within the first year, according to
iSeeCars. But some, often luxury models, get dumped at much higher rates, in one
case as many as 1 of every 8 sold.
The original owner takes the big hit on depreciation, and you get a shot at a nearly new
vehicle. Some companies give dealers incentives to buy such cars, use them as service
loaners, then sell them again even before they become the previous year's models —
mainly Mercedes-Benz and BMW, according to iSeeCars. The company considered
those unrepresentative and tried to weed them out of its statistics. To you, they're still
nearly new vehicles and potentially worth considering.
You should ask why a car so new is becoming a trade-in. You'll find lots of reasons.
Sometimes owners decide they really weren't the vehicles that they had expected. Or
they got a foretaste of iffy reliability and learned quickly about high service costs.
Sometimes, for those who can afford such impulses, buyers just want the newest shiny
thing.

Make a switch
When your preferred vehicle isn't available at a price you want to pay, look for
alternatives, ones you didn't have on your original list. The point is to wind up with
something similar to what you wanted but that you can find in greater supply on dealer
lots.
Sometimes that's another vehicle from the same brand. Other times it's a direct
competitor. It might even be a similar type of vehicle but a different size.
TrueCar researchers found these examples of how its users were looking at
substitutions: Those who wanted a Kia Telluride considered a Toyota Highlander, Kia
Sorento or Ford Explorer. If they were looking for a Toyota Tacoma, they also looked at
a Ford Ranger or Ford F-150. Potential Toyota RAV4 owners widened their scope to a
Honda CR-V, Mazda CX-5 or Subaru Outback.