Thursday, March 26, 2020

Will COVID-19 Change Automotive Buying Trends?

Hyundai Venue

The Great Recession of 2007–2009 changed the automotive landscape. For a time, people's cash flow was lower and many traded in their big SUVs and trucks for smaller, more compact cars. Although the true impact the COVID-19 pandemic has yet to be seen on North American economies, it's not looking great.

We've already seen automakers offering 0% financing for crazy-long terms (I saw an ad for 0% for up to 84 months yesterday!), loan forgiveness/discounts, and such. I'm already reading reports of a"cataclysmic" jobs forecast, and many Americans may be getting government stimulus checks. Obviously the automakers and dealerships are trying to get ahead of this. And the situation is slightly different than the Great Recession. 

One major differences is fuel prices. Gas prices in 2008 were averaging $3.27 a gallon in the U.S. As of today, March 26, 2020, the average price is a scant $2.07 according to AAA, a full $1.20 a gallon cheaper. Fuel economy is likely not to be a big selling point unless people are really pinching pennies. 

However, if the economy does start to skim bottom, I would think more people are likely to simply put a new car purchase on hold versus buying a less-expensive small car. Of course, this is just my anecdotal guess. I think we'll probably see a very bad March and April in terms of car sales overall, and not just for the U.S. and Canada, but globally. 

Could the COVID-19 benefit small car sales? It is possible. They're less expensive and may appeal to those in financial need (and those who actually need to buy a new car). However, I'm going to guess it's unlikely. 

Make no mistake: I'm not hoping for this deadly pandemic to increase small car sales; that would be selfish. From a purely economic viewpoint, it will be interesting to see how this does play out for the auto industry, and if there are any changes that could even shift the car buying paradigm. 

Please be safe and healthy during these unprecedented times. Automotive stuff for me is both my work and a distraction from all of the grim news. So be good to one another, help those in need, and do your part. You can also join the Subcompact Culture Facebook Group and interact with others who share your same passion. 

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