Amid financial uncertainty from COVID-19, American shoppers are extra hesitant to purchase or lease a automobile because the outbreak started. Used-vehicle consideration stays down in contrast with pre-pandemic ranges, however it’s stabilizing, whereas new-vehicle intent is reducing, in accordance with a examine by McKinsey & Co.

The consulting agency’s COVID-19 Auto & Mobility Shopper Insights examine, carried out in seven world markets together with theU.S., surveyed roughly 1,200 shoppers within the U.S. 4 occasions in Might by way of July, of which roughly 400 respondents had intent to buy or lease a automobile. It requested them:

1. Earlier than COVID-19, whether or not they had been “not going, seemingly or very seemingly” to purchase/lease a brand new or used automobile within the subsequent 12 months.

2. Given the present COVID-19 scenario, whether or not they had been “not going, seemingly or very seemingly” to purchase/lease a brand new or used automobile within the subsequent 12 months.

Within the newest survey, carried out July 15-17, 70 % of the U.S. shoppers who had an intent to buy mentioned that they might purchase a brand new automobile within the subsequent 12 months (seemingly 25 %; very seemingly 45 %). It was the bottom proportion among the many markets surveyed: United Kingdom (82 %), Germany (91 %), France (one hundred pc), Italy (79 %), China (91 %) and Japan (90 %).

The proportion of U.S. shoppers who had intent to purchase a used automobile within the subsequent 12 months was larger, at 78 %. It was larger than the U.Okay. (71 %) however decrease than the opposite 5 nations.

Between the June and July surveys, new-vehicle buy intent declined 4 % whereas used-vehicle intent rose 2 %.

“The used-car buy intent is slowly recovering, or stabilizing, on a barely larger stage than the new-car buy,” mentioned Hans-Werner Kaas, senior companion, automotive apply at McKinsey’s Detroit workplace. “I believe there’s a larger diploma of uncertainty behind it.”

Kaas mentioned a automobile’s utility operate, whether or not it’s used for operating errands, grocery buying or driving to and from work, has not modified all through the pandemic.

“However I believe what’s altering now’s there’s financial uncertainty on the market and public well being uncertainty,” he mentioned. “The patron does weigh [that] when he makes a purchase order and by which value stage he makes the acquisition.”

Kaas pointed to the pending discussions in Washington concerning the potential for one more stimulus package deal in addition to federal unemployment advantages as causes for larger uncertainty amongst shoppers.

Roughly one-third of U.S. shoppers plan to spend much less cash on their subsequent automobile buy in contrast with what they might have spent earlier than the pandemic, in accordance with McKinsey, and that has remained steady all through the 4 surveys.

That doubtlessly bodes nicely for used-vehicle gross sales, given the standard decrease promoting costs in contrast with new automobiles.

“The financial uncertainty drives extra monetary affordability concerns,” Kaas mentioned.

New knowledge on pricing

Nonetheless, new knowledge from Edmunds launched on Wednesday says that the typical itemizing value for used automobiles within the U.S. rose final month.

The common itemizing value for a used automobile, between the 2004 and 2020 mannequin years, was $21,558 in July, in accordance with Edmunds. That’s a rise of $708 in contrast with June’s common itemizing value, Edmunds mentioned.

“We’re seeing proof of extra typical new-car buyers gravitating towards the used automobile market than traditional in the course of the pandemic as a consequence of a mix of things: Shoppers are being extra financially accountable, rates of interest and CPO [certified pre-owned] gives have been extraordinarily favorable and stock has been severely restricted on the brand new aspect,” mentioned Ivan Drury, Edmunds’ senior supervisor of insights, in a press release.

For shoppers seeking to spend much less on a automobile by buying a used automobile, they may doubtlessly have extra avenues to take action sooner or later.

Growth plans

Along with the rise of on-line used-vehicle retailers reminiscent of Carvana, Vroom and Shift, a few of the largest dealership teams within the U.S. have launched growth plans tied to used automobiles.

AutoNation Inc., the nation’s largest new-vehicle retailer, mentioned it plans to spend as a lot as $220 million so as to add 20 or extra AutoNation USA used-only shops to its present 5 websites over the subsequent three years, whereas Sonic Automotive Inc.’s EchoPark plan contains including about 25 dealerships in 5 years, plus 20 supply and shopping for facilities yearly for 5 years.

Final week, IHS Markit mentioned the typical age of automobiles within the U.S. this yr rose to 11.9 years, up from 11.8 in 2019.

New-vehicle gross sales had been already reducing earlier than the pandemic, representing 6.1 % of automobiles in operation in 2019 from the record-setting 6.7 % in 2016. The report mentioned the coronavirus pandemic will speed up that development in order that U.S. new-vehicle gross sales will make up 5 % or much less of all automobiles on the highway in 2020.

“I believe you simply must be cognizant of the actual fact that there’s a group of shoppers on the market who may even favor a used automobile,” Kaas mentioned.