Right Now is a Great Opportunity to Capitalize on a New or Used Vehicle Deal

David Paris, Senior Manager, Market Insights at J.D. Power | Apr 17, 2020

With 42 states and over 300 million Americans under stay-at-home orders, chances are you’ve probably spent a lot of time watching TV or browsing online and been hit with a wave of attractive advertisements from automakers highlighting current deals on new vehicles. If you haven’t paid attention you should, because the offers available right now are great as current incentive spending is near record levels. For those who have contemplated buying a new or used vehicle and decided to hold off, you might want to reconsider and here are some reasons why.

Dealerships are Still Open and Selling Vehicles

Many businesses across the country are shut down, however, dealership sales operations are still functioning in virtually every market. Currently 24 states are allowing dealer sales departments to remain open with no restrictions aside from social distancing recommendations, 23 states are allowing only online or remote sales, while only three states have placed a full ban on vehicle sales. States that are currently not allowing sales include Hawaii, Kentucky, and Pennsylvania.

If you’ve decided to shop for a new vehicle, your buying experience is going to be very different from the last time you were in the market. Dealers across the country are being mindful of social distancing guidelines and have implemented processes accordingly to ensure consumer and employee safety. Some of the precautions include, but are not limited to, sanitizing vehicles and keys both before and after test drives, using steering wheel and seat covers, or even offering to accommodate contact free test drives and vehicle deliveries directly to customer homes.

New vehicle sales have slowed, through April 12 the period’s sales volume is 55% off from pre-COVID-19 forecast levels. This means that auto dealers need business and truly appreciate the opportunity to earn a sale. No matter if you’re shopping for a mass market or luxury vehicle, the purchasing experience will feel boutique and centered around you.

New Deals Right Now Are GREAT

J.D. Power data suggests that consumers who are capitalizing on new vehicle deals right now are purchasing more expensive replacement models, putting less money down, yet keeping monthly payments aligned closely with current outlays.

This is all made possible by lucrative incentives like 0% for 84-month financing offers as well as payment deferrals, which have armed consumers with an abundance of buying power. To put this in perspective, take for example current large pickup buyers. Customers in this segment are purchasing units that on average cost $13,000 more than the pickup they are replacing and putting on average $4,000 less down. However, by utilizing current 0% for 84-month offers, payments are on average only $76 more per month.

It’s not only large pickup buyers that are taking advantage of current deals. Another example showcasing the power of 0% for 84 month offers are small SUV purchasers. Average monthly payments for these vehicles are only $10 more per month despite customers purchasing vehicles that cost $6,000 more than their replacement. Small SUV buyers are also on average putting $3,000 less down.

 
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Don’t Forget About Pre-Owned

While new deals are great, consumers shouldn’t forget about used. If purchasing a new vehicle isn’t in the cards right now, used might be a great alternative due to their relative price savings compared to similar new versions. Late-model used vehicles offer much of the same safety, technology, and design features, but at a fraction of the cost. Certified Pre-Owned or CPO is another great way to save money compared to new. Consumers purchasing CPO vehicles benefit from knowing that the vehicle they’ve selected has gone through a rigorous inspection and reconditioning process and have the peace of mind of a factory-backed warranty. Another benefit of CPO is that automakers tend to offer more attractive financing opportunities for buyers, which are usually only seen on the new side of the market. Case in point, currently Volkswagen is offering 0% for 60 months on all CPO vehicles.

Like the new side of the market, used vehicle sales volumes are down as well. So far month-to-date through April 12 used sales at franchise dealers are down 63% compared to the same period in 2019. However, while sales volumes are down, used prices are holding up well. Used retail prices remain strong and finished the week of April 12 down an average of just 1.2%, or $260, from their level at the end of February.

If you’re trading in a vehicle you want to be aware of what your vehicle was worth pre-stay-at-home orders, and its current value to ensure you’re receiving a fair offer. For example, in February a 2017 Honda Accord Sedan EX 2.4L held an average trade-in value of $14,125, currently that same vehicle has a value of $14,025, a reduction of only 0.7% or $100. The same thing can be seen if you look at the popular 2017 Jeep Grand Cherokee Limited 4WD 3.6L, in February its average trade-in value was $21,975 and currently it is $21,800, a decline of 0.8% or $175. J.D. Power trade-in data suggests that offers made by dealers have held up relatively well too, many dealers are still accepting trades and the amounts are similar prior to stay-at-home orders were issued. While in general trade-in offers are strong, it is important to remember that in some cases there may not be a demand for your trade.

J.D. Power has also observed changes in how instant cash offer companies are doing business during COVID-19. Carvana, Vroom and other large players have reduced the number of vehicles they are purchasing by limiting appraisals and offers to vehicles that are part of a trade-in/purchase transaction. Currently, you can’t sell your car to companies like these without purchasing a vehicle from them.

Used vehicle prices are expected to decline by around 7% from now through June, before recovering over the second half of the year. Used prices can change rapidly, so it’s important to understand how used vehicle prices are changing to make sure you not only receive a fair trade-in offer and ensure that you don’t overpay, but also have a firm understanding of your equity position.

Do Your Homework, J.D. Power Can Help

J.D. Power is a great resource to help navigate the complex world of buying a new or used vehicle. For more information be sure to check out J.D. Power owned NADAGuides.com for new, used, and CPO vehicle prices as well as our latest COVID-19 incentives content.

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