Has COVID-19 affected the used car market?
4 min read
Recently we have seen a significant change in the buying patterns of those purchasing vehicles. Statistics show the volume of new vehicle purchases has decreased, with the lower sales numbers attributed to major events happening in the global economy. The COVID-19 pandemic has led to both income decline and a reduction in the number of jobs available worldwide. Despite all of this, when looking at the used vehicle market, we are now seeing a significant increase in sales.
In 2019 the global used vehicle market was valued at $1,332.2 billion (USD), versus $1,402.0 billion (USD) in 2020. It is expected to grow at a compound annual growth rate (CAGR) of 5.5% from 2020 to 2027. Ironically, this increase in sales can also be attributed to the COVID-19 pandemic - this is because people are now in the market for used vehicles, as opposed to purchasing something new and therefore more expensive.
Motivation behind increased used-vehicle sales
Growing Desire for Safety
Part of the growing demand for pre-owned vehicles can be attributed to safety. In a time when social distancing is the new norm, people have begun to prefer private vehicles over public transport. Also, with the introduction of various restrictions around the world, having the ability to travel alone is now a necessity for some. Having your own vehicle can not only lower the risk of spreading or catching a disease but also help to reduce travel anxiety for those who may be at higher risk.
Decrease in Income
During the recent COVID-19 pandemic, many have suffered from loss of income due to pay cuts and loss of employment. Now investments suddenly seem more risky. People are keeping their money closer to hand in case further economic downturn occurs. Many of them are postponing their decisions to make new purchases, including vehicles. This means people do not have the financial resources or stability to purchase a new car or truck and are more likely to consider a pre-owned vehicle.
A used vehicle offers a variety of price ranges to choose from, and quality vehicles can still be purchased at a considerably lower price than if they were bought new. Depreciation is huge when considering the value of a vehicle, and while wear and tear occurs with use, the difference in quality between a brand-new vehicle and one a few years old is minimal compared to the difference in cost. This means many shoppers will find what they consider to be equal or better value when looking at pre-owned options.
The online market
Another change we see in the global market is the transition from offline sales to those made via online platforms. This is especially true in the market for used vehicles.
In 2019 onsite vehicle sales made up 78.3 percent of the total, but as of 2020, this number has dropped significantly. Prior to the pandemic, it was traditional to buy a car in person, usually after taking it for the test drive. COVID-19 has required sellers to adapt, working around restrictions now in place around the world. With personal health and safety a mandated priority, the method of locating and purchasing a vehicle online is becoming popular.
Looking at statistics, we can see a noticeable increase in the number of people searching for used vehicles online. From July to September 2020, we can see the number of searches for “vehicles over 20 years old” increased by 80% in France, 77% in the Netherlands, and 59% in Belgium.
In conclusion, we can see the COVID-19 pandemic directly correlates to the increase in purchases of pre-owned vehicles. In the future, we will likely see significant changes in the vehicle market. The economic effects of the pandemic will be felt for years to come, and some of the changes in procedure are likely here to stay. The pre-owned vehicle market appears to be one of the few industries to benefit from the pandemic, as it offers an affordable alternative to those looking to purchase a safe, reliable form of transportation.