Used Cars, A Safe Harbor for Dealers

The used car market is more than twice the size of the new vehicle market and is outpacing it in terms of growth (source: NADA). Used car demand in the United States is estimated at 39.4 million used cars per year versus 17 million new vehicles.

Even in these uncertain times, used vehicles prove to be safer harbor than new ones, with peak-to-trough declines averaging about 11 percent over the past two decades, compared to 23 percent for new ones. Historically, used-car sales have had less volatile reactions to market shocks, such as the 2008–2009 recession.

Last weekend, Washington unloaded the largest consumer bailout in history.

• The bill provides direct payments of up to $1,200 for most individuals and $2,400 for most married couples filing jointly with an extra $500 for each child.
• Assistance would start to phase out for individuals earning more than $75,000 and for couples with more than $150,000 in income.
• Unemployment insurance benefits would be expanded, increasing the maximum benefit by $600 a week for up to four months. Benefits would be available to workers who are part-time, self-employed, or part of the gig economy. People who are still unemployed after state benefits end could get an additional 13 weeks of help.

It remains to be seen if consumers use the money for its intended purpose or opt for purchases of used vehicles, televisions or new iPhones. In any event, used vehicles will continue to be sold at a higher rate than new vehicles, and they represent your best opportunity to weather this crisis.