We’re mid-pandemic. Is now a good time to buy a used car?By: Joanna Richards on April 27, 2020
The COVID-19 pandemic has most people spending less than they used to, and large portions of the economy have been shuttered in order to keep us socially distant and safe. But the pandemic has also started to create some unique opportunities for consumers. Among them: getting a great deal on a used car.
The new coronavirus is changing the used car market, with some experts projecting a significant price collapse in the coming months. Just like your grocery shopping experience has changed significantly due to COVID-19, buying a used vehicle is now a new world with risks, complications, and uncertainties.
Let’s look at the things you need to consider if you’re interested in making a used car purchase during the pandemic — everything from favourable pricing to logistics to health and safety concerns.
We’re in a ‘buyer’s market’
Used vehicles are getting cheaper, and that trend is likely to continue over the next few months, says Brian Murphy, vice president of research and analytics at Canadian Black Book, which bases its forecasts on pricing data for about 26,000 vehicle makes and models.
“Prices will probably drop about 15% for cars and about 18% for trucks and SUVs between now and the middle part of the fourth quarter,” Murphy says, which would be around late October.
That expected drop in used car prices is enormous, considering pre-pandemic trends. “Before all this happened, used car prices had been going up for the previous 10 years in a pretty steady way,” Murphy explains.
“We started to see things slow down in March by 1%, which might not seem like a lot but it’s actually significant. It’s the biggest decrease in pricing we've seen across the whole industry since September 2007. We expect this month the decline will be even greater.” Through April, May, and June, Murphy is expecting “a record-level drop in prices.”
The forecast calling for a 15 to 18% price decrease for used vehicles through summer and early fall represents a huge trend reversal — and potentially big savings compared to what shoppers could have hoped for previously.
Murphy says one major contributor to the expected price declines will be vehicles coming off of leases. Previously leased vehicles are a huge source of high-quality inventory in the used car market. Spring is when people typically look to buy or lease a new car and many leases come due.
But because of the pandemic, more people are holding onto their leased vehicles, as dealerships and drivers negotiate extensions during these extraordinary circumstances. When those leases come to an end later in the summer, there’s likely to be a glut of used vehicles showing up at wholesale auctions.
Murphy says he expects prices to start going up again in mid-fall, depending on when the broader economy reopens and puts more cash in consumers’ pockets and boosts their financial confidence. But he expects it will take a long time for prices to climb back to what they were before COVID-19. So, if you’re in the market for a used car now or think you will be in the months to come, you’ve likely got a good window of savings opportunities ahead of you.
“There certainly are dealers out there who are looking at their inventory and wishing that they had fewer cars on their lot,” Murphy says. “Right now it’s a buyer’s market, so buyers are really in the driver’s seat.”
Car buyers in Ontario and Quebec aren’t actually allowed behind the wheel right now, at least not when it comes to test drives
From dealership to desktop
Metaphorically speaking, yes, used-car shoppers are in the driver’s seat right now, but the reality is: car buyers in Ontario and Quebec aren’t actually allowed behind the wheel right now, at least not when it comes to test drives.
In those provinces, dealer showrooms are closed to the public but online sales are permitted. In other provinces, rules are a bit more relaxed, though dealerships are generally taking precautions up to and including closure. Murphy says about 60% of dealerships nationwide have closed to sales completely.
So, how do online sales actually work in practice?
Sebastien Bourgeois is the general manager of Spinelli Nissan, part of Groupe Spinelli, comprising nine dealerships that sell new and used vehicles in Montreal.
His dealership was already offering online sales, including home delivery, before the pandemic. Customers can’t do test drives right now since they violate Quebec’s social distancing requirements, but Spinelli Nissan offers a three-day window for returns following a sale.
“It makes the process less stressful,” Bourgeois says. Some other used car dealerships in Ontario and Quebec have been implementing similarly flexible return policies given the hesitation most customers feel about committing to a vehicle without actually test driving it first. This means customers don’t really have to commit to a vehicle before they’ve driven it, but they also don’t have the option of test driving multiple vehicles for comparison’s sake as they would normally.
Bourgeois says his sales team, which is down to a skeleton crew now, had previously done a bit of videoconferencing for online sales, but are doing more of it now to assist customers remotely. “We’re very flexible,” he says. “All the different types of technologies that people request we’re able to do that,” says Murphy. That might include things like FaceTime, Skype, or other video chat programs. The goal is to make consumers comfortable, since everyone is adjusting to the new way of doing business during a pandemic. “We usually wait until customers ask for that so we don’t freak them out,” he says.
Once a customer agrees to a sale, “We have a team that does the car prep,” says Bourgeois. “We use germ cleaners and all of that stuff.” The dealership is already equipped to assign new licence plates on site, too. Come delivery time, an employee wearing a face mask and fresh gloves drives the vehicle to the buyer’s home, where the buyer has to review and sign some paperwork before the car is officially theirs.
Bourgeois says most used car sales since the pandemic hit have been to essential workers needing to commute and people in total-loss situations with their vehicles. “Those are the types of situations that we see, when people have the need to get the car right away,” he says. Other people who want to buy but don’t need to immediately are simply gathering information and waiting until dealerships reopen.
Bourgeois hasn’t made significant decreases to used vehicle prices at this point, but he reviews pricing every week to stay in line with the market. He says he’s gotten just a few inquiries from people hoping to score a deal given the current crisis.
More of that may be coming, though. Plenty of people are holding off on buying vehicles until they feel more confident about their financial futures, but if you’re in a position to buy soon, the next few months may be exactly the right time to look for a used car.