The rain has drastically slowed in the automotive community for the month of May 2020. While year-over-year data suggests that there is still progress to be made, sales in the month of May drastically increased over April 2020.
In January 2020, 158,657 people showed up to buy a car in Los Angeles. Three months later – only 66,928. A 57.8% decline in sales is totally catastrophic, the impact of which will be felt long after the pandemic has passed.
The U.S. as a whole lost about 4.6 million customers between March and April 2020 – a decline of 52.8%. According to Cross-Sell data, the average car sold for $23,451.07 (last 10 model years) in January 2020 so that means an economic loss of roughly $108 billion.
But April showers did bring May flowers – with increases that we have not seen in a while, and certainly once that we were all hoping for.
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Most dealers are probably breathing a sigh of relief to see these increases, but automotive isn’t entirely out of the woods yet. The U.S. as a whole is down 33.9% compared to a year ago. With lingering concern about the pandemic and many states reopening – many buyers will still be hesitant to return to market.
“We recently analyzed three different buyer profiles; Highline buyers, those with an excellent credit score and were unaffected by the pandemic, the Middle Class who are by nature a cautious buyer with a decent credit score and Subprime buyers, those who don’t have great credit who are incentivized by stimulus checks,” says Allen Faith, lead analyst at Cross-Sell. “We believe the subprime buyers already came in and helped keep our dealerships afloat when things were getting really lean in April and May. The highly qualified buyers quickly followed suit and took advantage of the offers that were out there. We believe the middle class is still out there, waiting for the right time to buy.”
Notably, Hertz reported last week that they were planning to dump 30,000 cars into the market to increase their cash position.
“This may be what we need to bring out the middle class buyer,” concludes Faith.