The uncertainty precipitated by COVID-19 has affected every sector of the economy, including the automotive industry. Car dealerships are experiencing sharp declines in used car sales, as much of the country still remains under lockdown. While used car sales have always been prone to fluctuations, data from the U.S. Census Bureau found that retail used car sales plummeted more than 20 percent year-over-year in March even before the full effects of stay-at-home orders were realized. The last time that used car sales fell so precipitously was at the onset of the Great Recession in 2008.
Research from automotive research firm Manheim shows that in response to reduced demand, wholesale prices (what dealers pay to buy the used cars they sell) experienced a more than 11 percent drop in April. However, the drop in wholesale used car prices has not fully hit the retail market—at least not yet. According to analysis from CoPilot, which aggregates car listings data in real-time across 46,000 U.S. dealers, retail prices for pre-owned vehicles only fell 3.6 percent nationwide between January and May 2020.
Experts from Kelley Blue Book suggest that because car dealers have largely avoided purchasing new inventory in recent weeks, they aren’t in a rush to cut prices as a way to move their existing inventory. However, an analysis from Max Digital predicts that a combination of record supply, damaged consumer confidence, and new car incentives will ultimately create a perfect storm causing retail prices to drop sharply in the coming weeks.
Despite only a slight drop in retail prices at the national level, some parts of the country are already experiencing steeper declines than others. Between January and May, individual U.S. states experienced price drops ranging from 1-5 percent. The states with the biggest drops include Utah, Delaware, and Florida, which all experienced decreases greater than 4.5 percent. By contrast, the states with the lowest drops include Hawaii, Wyoming, and Mississippi.
To identify the states with the faster declines in used car prices, researchers from CoPilot, a car shopping app that helps guide users through the buying process, analyzed its proprietary dataset of more than 1.3 million used car listings in the United States and created a ranking based on each location’s change in average listing price between January and May 2020.
The analysis found that used car prices have dropped an average of 4.31% in North Carolina since January, compared to a drop of 3.60% nationally. Out of all states, North Carolina’s used car prices have dropped 5th most during the pandemic in the U.S.
Researchers also identified that the automobile model that has experienced the biggest drop in used sale prices since January in North Carolina is the Mercedes-Benz GLA-Class (-10.1%). Across the nation as a whole, the Fiat 500e (-17%) has experienced the largest drop.