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

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

1. Earlier than COVID-19, whether or not they have been “unlikely, probably or very probably” to purchase/lease a brand new or used car within the subsequent 12 months.

2. Given the present COVID-19 scenario, whether or not they have been “unlikely, probably or very probably” to purchase/lease a brand new or used car within the subsequent 12 months.

Within the newest survey, performed July 15-17, 70 p.c of the U.S. shoppers who had an intent to buy mentioned that they might purchase a brand new car within the subsequent 12 months (probably 25 p.c; very probably 45 p.c). It was the bottom share among the many markets surveyed: United Kingdom (82 p.c), Germany (91 p.c), France (100%), Italy (79 p.c), China (91 p.c) and Japan (90 p.c).

The proportion of U.S. shoppers who had intent to purchase a used car within the subsequent 12 months was increased, at 78 p.c. It was increased than the U.Ok. (71 p.c) however decrease than the opposite 5 nations.

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

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

Kaas mentioned a car’s utility perform, whether or not it’s used for operating errands, grocery purchasing 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 through which worth stage he makes the acquisition.”

Kaas pointed to the pending discussions in Washington relating to the potential for an additional stimulus package deal in addition to federal unemployment advantages as causes for increased uncertainty amongst shoppers.

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

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

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

New knowledge on pricing

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

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

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

For shoppers trying to spend much less on a car by buying a used car, they are going to doubtlessly have extra avenues to take action sooner or later.

Enlargement plans

Along with the rise of on-line used-vehicle retailers corresponding to Carvana, Vroom and Shift, a number 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 have been already reducing earlier than the pandemic, representing 6.1 p.c of automobiles in operation in 2019 from the record-setting 6.7 p.c in 2016. The report mentioned the coronavirus pandemic will speed up that pattern in order that U.S. new-vehicle gross sales will make up 5 p.c or much less of all automobiles on the highway in 2020.

“I believe you simply have to be cognizant of the very fact that there’s a group of consumers on the market who may even desire a used automotive,” Kaas mentioned.