Whether the changes in lifestyle brought about by the Covid-19 coronavirus are permanent (doubtful) or just for now (more likely) is a matter to be decided in the coming months and years. However, it appears that lasting changes may be taking place in the automobile industry. Gildshire looks at two changes, one temporary and one permanent, because the coronavirus is changing the car industry. Both Bloomberg and Car and Driver helped with the research.
The auto industry is sounding an alarm about a used-car price dip that would have grave consequences for lenders, rental car companies, and manufacturers. Used-vehicle auctions are pretty much paralyzed. The worst concern is that cars and trucks are already piling up where buyers make bids. Worse yet, this inventory imbalance is likely to last for many months.
If prices fall precipitously, it will be a detriment to carmakers’ in-house lending departments. They will have to lower the assumed value of lease contracts that had called for vehicles to retain a higher value. As a result, rental car companies will get less from selling off a portion of their fleet that is sitting idle amid the global pandemic.
“Six months from now, there will be huge, if not unprecedented, levels of wholesale suppliers in the market,” Dale Pollak, an executive vice president of Cox Automotive, which owns North America’s largest auto auction company, wrote in an open letter to auto dealers last week. “Cars are coming in, but they aren’t selling. Today’s huge supply of wholesale inventory suggests supplies will be even larger in the months ahead.”
Car dealerships remain open, but the slow dance of the traditional purchasing process suddenly seems almost impossible. And, your average traditional dealership lacks online shopping tools that you can easily navigate. In fact, Michelle Denogean, CMO at Roadster, estimates that only about 20% of car dealerships have ANY tools for online shopping. But that is quickly changing. Rhett Ricart, chairman of the National Auto Dealers Association (NADA), expects “80 to 90%” of dealers to have browse to final purchase e-commerce capability by the end of 2020.
Those are hopeful words, but obstacles remain between now and a seamless online vehicle purchase. A sizable majority of buyers need financing. So, a conversation, at least on the phone. And, while you can e-sign a tax return, such a thing is not yet legal in most states when it comes to a vehicle purchase.
Carvana has already instituted a no-contact pick-up and delivery system to minimize contact. Customers who choose home delivery (meaning those out of range of Carvana’s too-cool car vending machine) can sign the contract. The delivery driver waits outside. The customer drops the signed contract in a preapproved spot.
The pandemic is changing the car industry, but that is just another “get-in-line for yet another segment of retail society. Has this thing changed us? Of course, it has. Has it changed us forever? That remains to be seen. But lasting change appears to have taken place when it comes to buying and selling cars and trucks.