Car dealerships are scrambling to keep inventory in stock as used-car sales skyrocket.
Auto factory closures, stimulus checks, and low interest rates are among the reasons more customers are buying used cars.
Bob Bolen, president of Big City Cars on Lima Road, said he bought a normal amount of inventory in preparation for tax season, a popular time to buy a car. He has seen record sales numbers the pasttwo months.
Bolen said dealers were wary of buying more inventory when the pandemic hit, so the value of cars at auction dropped drastically. Bolen reduced the prices of his own inventory.
But tax season was delayed. Many people received their refund later, along with a stimulus check. Bolen said that meant Fort Wayne dealerships saw some of their highest sales in May and June. People were buying cars faster than he could acquire inventory.
“There’s no bars to go to, there’s no concerts, so now the general public keeps having more and more money,” Bolen said. “Then they got a stimulus package. Then we opened back up. People came out of the woodwork.”
Online auctions are extra competitive now, and prices are sky high, Bolen said. Used cars are going for thousands above estimated retail values.
The market is flooded, but there’s also a shortage. Bolen attributes part of this to banks offering Paycheck Protection Program loans for the coronavirus pandemic. In many cases with PPP loans, banks can’t repossess cars if a payment isn’t made. Repossessed cars account for 20% to 25% of all cars at auction, Bolen said.
To top it off, new car dealerships are holding on to trade-ins. Customers returning their leases are looking to trade up for a newer model, but there’s a shortage of new cars because of factory delays and closures.
So instead of buying new, some customers are likely to buy a slightly used model. Rather than drive business away from their dealerships, new car retailers are holding on to those used models, again reducing the number of cars at auction.
ALG Inc., a subsidiary of TrueCar Inc., that tracks vehicle sales data, said in a July 27 release that total retail sales would likely be down for last month. But used-vehicle sales for July were expected to reach 3,759,781, up 9% from a year ago and down 1% from June 2020.
Eric Lyman, chief industry analyst for ALG, in late June predicted a rebound in used-car sales.
“While used vehicle sales were initially hit harder than new vehicles due to COVID-19 impact, we expect that trend to reverse itself now due to new car inventory shortfalls,” Lyman said. “Used vehicle inventory is always much larger than new and lease returns have been picking back up, adding a flood of 2- to 3-year-old vehicles back into the used market. Additionally, there’s attractive financing and lower price points, which are all helping spur increased demand in the used vehicle market.”
Yared Tekle, owner of Mame Auto Sales on Spy Run Avenue, said he’s seeing the demand for used cars.
“Last Thursday, I went to auction, and there were 400 cars and close to 1,000 dealers,” Tekle said.
Tekle said he’s struggled with not enough supply for a surge of demand. He said his profit is down because he cannot buy enough cars to meet demand.
Mike Shifferly, general manager at Shifferly Automotive Inc. in Decatur, said it’s a crazy time for the automotive industry, but he believes the market will slow down eventually.
“I don’t think it can stay like this. It’s too high,” he said.
Jim Zimmerman, salesman at Bart’s Car Store, agrees.
“As soon as people are able to get back to working full time, get off unemployment and back to working, it’s going to help us,” he said.
Until the market stabilizes, dealers agree there will be a lot more competition when it comes to auction.