California’s hot car in the pandemic era is a used vehicle — the older, the more coveted — with a rising price tag.
Auto sales have been chilled by a pandemic that’s rearranged transportation needs — most notably remote work and virtual schooling that have eliminated commutes. Months of economic uncertainty morphed drivers across the state into more budget-conscious shoppers, boosting the value of used cars.
So, it’s no huge surprise that my trusty spreadsheet, filled with sales data from the California New Car Dealer Association, found a fairly broad sales slump in the first nine months of 2020.
Overall, 3.87 million vehicles — new and used — were registered in California through September. That’s 11% behind the 2019 pace even after a summertime revival. As of June, sales were down 19% year-to-date.
Car sales were hurt by spring’s showroom shutdowns. Record-high unemployment created by “stay at home” orders also dealt another blow to auto dealers.
I’ll note that last year wasn’t so hot either. Sales dipped 1% vs. 2018 in the same nine-month period.
The 2020 sales drop was by no means evenly spread out.
Consider used cars, the penny-pincher’s favorite. Auto registrations show 2.67 million sales were recorded in California through September, 8% below last year. In 2019’s first nine months, sales had risen 1% vs. 2018.
Price matters, even in this budget category. Sales of the costliest used vehicles, those less than 3 years old, dropped 11%, while cars 3-to-7 years old were off 7%. But the oldest wheels — seven-plus years, the market’s bargain-basement — saw a 3.6% sales gain.
Now let’s compare that chill to what transpired on new car lots. The 1.2 million registrations for non-fleet purchases through September was double the dip of used cars at 16% below 2019. It’s the fourth consecutive year of declines for new cars since 2016’s peak.
The deep drop for new vehicles meant used cars’ slice of the market grew to 69% of all California registrations vs. 67% in 2019 and 64% in 2016.
Yes, new-car dealers have one good excuse: factories and shipping shut temporarily early in the pandemic, so inventory was limited. This helped push folks to the used-car lots.
Also, fear of mass transit as a virus-spreading opportunity motivated those still commuting to work to buy cars. The lower-income demographics of bus and train riders typically favor used cars.
These economic forces all helped balloon what drivers will pay for older vehicles — especially when falling new-car sales meant fewer trade-ins and thin inventories even on used-car lots.
Let’s look at recent changes in California’s Consumer Price Index of car-buying costs, using an average of Los Angeles, San Francisco and San Diego cost-of-living indexes.
Used car pricing soared at a 9.9% annual rate in September and October vs. 0.4% vehicle inflation for 2019.
That’s far different pricing than what new-car buyers got: September-October was flat vs. a year earlier. In all of 2019, new-car costs rose just 0.2%.
The statewide used-car price surge is in line with a national study by Iseecars.com showing the average used car price is up 9.5% in the year ended in October, or a $2,193 hike to $25,299.
This pandemic, however, has had a quirky impact on U.S. driver preferences for used vehicles. The uneven economic damage is further highlighted by what vehicles folks will pay up for.
Iseecars.com found prices of sporty models like convertibles were up 27% in a year. Other popular models: coupes were up 16% and pickups rose 14%. Yet in an age where nobody wants to be crammed into tight spaces — and with carpooling limited — the smallest hikes were for minivans (up 2%) and wagons (up 6%).
Source: Orange County Register