Tuesday, 21 July 2020 21:26

Auto Stocks Benefiting from Rising Used-Car Values

Written by Josh isley, CBT Automotive Network


There are many adjustments necessary to maintain operations in the midst of the COVID-19 outbreak. For most auto dealers, online, pick-up and delivery options became more used than ever before.

While dealers creatively adjusted to continue selling cars, the lack of new car inventory has been an unavoidable road block. Many auto plants have had to halt or minimize production due to closures or lack of staff.


The obvious beneficiary in the midst of the new-vehicle shortage is the used-car market. Due to supply and demand, used-car prices are on the rise. While this comes at the displeasure of car buyers, it does point to a huge positive for auto stocks and their holders.


Back in April, used-car prices hit a low that hadn’t been seen in several years. Barron’s reported the year over year numbers for pre-owned vehicles dropped about 9%, while new car sales fell almost 50% year over year. However, used-cars started to make a faster recovery beginning in May and reached new highs in June and early July.


Richard Walker, Auto Trader’s director of data and insight, gave his thoughts on the situation.


“It’s not just that the prices are up right now; ever since retailers have been able to restart their sales, used car prices have seen substantial growth for more than 10 weeks and it’s clear this growth is accelerating," Walker said.


“It’s imperative to consider all market factors when evaluating price. Price is driven by supply and consumer-driven demand, and although supply has been constrained with auction houses being slower to reopen since lockdown, they are returning to over 90% of pre-COVID-19 levels.


“We encouraged retailers to retain their prices during the lockdown which paid off and the industry is seeing the benefits of that now," Walker said. "This message still stands, prices remain robust overall, they are growing in the majority of segments and there are no indications to suggest retailers need to start reducing them.”

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