By on August 14, 2020

2020 Toyota Corolla Hybrid - Image: Toyota Canada

Consumer spending and confidence are not hitting record highs. Go figure. As the pandemic rages and a vast swath of formerly gainfully employed Americans find their financial future much hazier then before, new car sales are suffering. It doesn’t bode well for sales volume during the remainder of the year.

Of course, that pain is not spread evenly among all automakers, but let’s set the OEMs’ concerns aside for a moment. What are actual buyers and doing — and thinking?

According to a Cox Automotive consumer impact study of 1,000 U.S. consumers, the coronavirus has knocked numerous Americans out of the new car market, at least temporarily. For others, the new reality has led to a lowering of expectations. Maybe that next car doesn’t have to be quite as extravagant.

Even during the lockdown, as in the early stages of the pandemic, some 20 percent of survey respondents said they felt they’d be in the market for a vehicle in the next six months. That slice of hopeful consumers sank to 17 percent in the reopening phase (May to mid-June). At last report, following the first week of August, only 15 percent of consumers claim the’ll be looking to get into a new ride in the coming half-year.

For those who were planning to buy, it seems fewer people have an excuse to not look. At the height of the lockdown, in April, some 34 percent of respondents said they were delaying a new vehicle purchase or lease due to the virus, up from 17 percent in early March. That figure’s down to 26 percent on August 7th-8th, with Gen Z, X, and Boomers listing cost concerns and their own financial situation as the top reason. Millennials most often cited social distancing/staying at home for the delay.

Which isn’t to say everything’s rosy for Millennials during the pandemic. Employment is perilous, and government stimulus and employment insurance is not infinite in either scope or duration. At last check, some 53 percent of survey respondents reported some kind of employment disruption (reduced hours, pay cut, layoff, furlough, etc), down from 62 percent during the lockdown and 57 percent in late June.

Of note, the study found that some 23 percent of vehicle owners used a dealership service pickup/delivery service since the onset of the pandemic — your author included. Eighty-five percent of respondents claim they were satisfied with the service, with only 2 percent saying it sucked. Thirteen percent were neutral on the matter.

But back to buyers. With their broader fiscal stability, Boomers proved least likely to respond that they had adjusted their new vehicle price range (36 percent), while Gen Z and Millennials were most likely to opt for something cheaper (58 percent for both). Of those groups replying in the affirmative, 75 percent of Boomers said they were looking for a more inexpensive vehicle, with Millennials close behind at 73 percent. Some 65 percent of Gen Z buyers in the process of shifting their price window were looking to spend less.

For these same window-shifting respondents, 18 percent of Gen Z, 17 percent of Millennials, and 14 percent of Boomers were now looking to spend more. As for Generation X, 49 percent said they had shifted their price range, with 69 percent of that group saying cheaper was the way to go. Seventeen percent said a pricier vehicle was now in the cards.

“Affordability issues are paramount for shoppers who have been financially impacted, with Gen Z and Millennials the hardest hit,” said Cox Automotive. “That makes the potential for a second round of stimulus payments and the extension of additional unemployment benefits something to keep an eye on.”

It also leads us to keep an eye on entry-level products like compact and subcompact cars, both segments which have suffered greatly over the past couple of years, as well as sales of premium automobiles and high-priced pickups.

[Image: Toyota, Honda]

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21 Comments on “Getting Back to Normal? Far From It – U.S. Rife With Gloomy Consumers, Young Car Buyers Lowering Their Expectations...”


  • avatar
    kcflyer

    The virus had an effect on our car purchase decision. More accurately, the government’s response to the virus did. We had planned on a new SUV next year. More specifically a Lexus GX460. This was by far the most we have ever spent on a new vehicle. When the politicians decided to throw trillions of debt at the virus on top of hammering the economy my thought was by next year we could see significant inflation and higher interest rates. So we started looking back in March. When a CPO 2019 GX appeared with only 300 miles on it we pounced. Couldn’t be happier with our purchase and the sub 2% 60 month loan. We plan to pay it off in two years but I still worry my relatively secure job could go away before then.

  • avatar
    ahintofpepperjack

    I know somebody who delivers pizza for a living. He is a great guy but not smart enough to “learn to code!” and he made some mistakes as a young man leading to a felony on his record.

    Anyways, he recently purchased a brand new Ford Fiesta for $13k OTD. He needs a car that is going to be reliable because his car is his livelihood. He tried a couple used cars before this but they ended up needing costly repairs (and he’s not mechanically inclined) and then he had to rent a car just so he could work. In the end affordable new cars are his only safe option. Now manufacturers have decided to abandon this segment while a pandemic is hitting the economy. Now the cheapest new cars in my area are Ecosports listed at $15.6K + TTL = ~$17k. So ford has found a way to make the fiesta get worse gas mileage and charge the less fortunate $4,000 extra.

    • 0 avatar
      gasser

      I hope he purchased a manual Fiesta, as I am not sure that the automatic Fiesta is a paradigm of reliability with their recent recalls and settlements.

      • 0 avatar
        ahintofpepperjack

        While I wouldn’t like to take the risk, supposedly the 2017+ Powershift transmission are fixed. When it comes to economy cars with automatics your only other option is a CVT these days. So You’re taking a risk either way.

    • 0 avatar
      CKNSLS Sierra SLT

      ahintofpepperjack

      It sounds like your friend is turning his life around. To echo another post-yes the automatic Fiestas are plagued with issues. If he can still get a extended warrant on it from the dealer-now is the time to do so.

      In addition Hyundai Elantras can be had for $14,000.00 or a little less.

      • 0 avatar
        Superdessucke

        Correct. An unreliable Fiesta could knock him right off the straight and narrow. No one likes paying for an extended warranty but for some cars it makes sense.

  • avatar
    ToolGuy

    Based on a rough extrapolation of recent world events, the zombies will be emerging on or around March 1, 2021.

    Knock out those bucket list items soon.

    (Proposed QOTD: What vehicles would you like to own or drive while you still have your brains?)

  • avatar
    Glenn Mercer

    I don’t get it. How can we say that new-vehicle buyers are looking for a cheaper car, and that there is an affordability issue, while simultaneously OEMs are dropping small cheap sedans due to lack of demand, and while average transaction prices continue to soar?

    • 0 avatar
      gasser

      I suspect that is because car manufacturers predict future sales based upon past sales data. Small car sales are slowing for the past few years, so out they go from the sales mix. In the past, only a few times have the manufactures led the market (‘64 Ford Mustang, ‘84 Chrysler minivans). This is why, at an inflection point in sales charts, (like the oil shocks of ‘73, ‘78) they don’t have the product they need. As to small cars, since they don’t really generate much profit to American manufacturers (why is another question), they really don’t seem to care if they lose these sales. IDK about the theory of getting a customer while he/she is young and they will stick with you for years.

      • 0 avatar
        DenverMike

        It’s just a theory. Except suppose they go directly from entry level Fords to entry BMWs? Or entry Audis? Then what?

        When (the bigger) automakers were dreaming up these schemes, there were just a handful of brands, with a few on the fringes.

        Now everyone cherrypicks from all the categories and hardly limit themselves to just one brand.

        Or if they’re that good, they stay with your entry level cars for life. Yikes.

    • 0 avatar
      PandaBear

      The US big 3 made the right choice dropping small cars, but the wrong choice focusing only on the US market. In order for small cars to work you need to be heavily involved in the developing emerging market like India, Thailand, Mexico, Philippine, Africa, etc. US market has not many small cars and the small cars buyers are usually too focus on cost that they are not profitable in the US market alone.

      You can sell a new Corolla to my parents, who buy a new Corolla every 25 years, and never use dealer for services outside warranty, and expect to pay only 13k 25 years ago and only wants to pay 17k this year.

      They ended up with a 2012 Mazda 2 that has been riced up with 66k miles for only 7.2k this year. I would imagine Mazda drop 2 a few years ago because of this exact reason.

  • avatar
    sckid213

    Steph – What did you think of the dealership pick-up / drop-off service?

    I could see that really taking off and lasting post-pandemic if it doesn’t add too much cost for dealers (I’d imagine a few porters at minimum wage?)

  • avatar
    S197GT

    the strong used car values might put us into the market. we have a couple of cars we like but don’t love and could sell them to find something we more prefer. i was told i was getting a new company car, ford fusion hybrid, and i own a 2017 fusion SE ecoboost. i’ve been happy with my fusion, but there is no passion there, and i don’t want two on my property.

    thought about getting rid of my wife’s kia sorento sx (2016) after she got furloughed; carvana offered $1000 over KBB good value, which really surprised me. online reviews confirm their offers are legit and painless. they are desperate for suvs. their offer for my fusion is less strong but still solid.

    but getting rid of my fusion, and my old ranger, and buying a new ranger lariat (when the end of year discounts hit) is a real possibility for me; especially with the fox shocks offered by ford racing, which appear to solve the main issue i thought i might have with the new ranger: the floaty FX4 suspension.

  • avatar

    We had this problem in Russia before, as usual. For the same price it is better to buy good used car than a cheap new car. Preferably from Germany or Switzerland because they take good care of their cars. Or from Japan if you can live with steering wheel on the wrong side. Do not buy used cars from USA or Canada.

  • avatar
    Superdessucke

    Not to brag but I’ve been saying Ford, FCA, and GM made a big mistake abandoning low cost cars. Too early to tell obviously what’s going to happen but this isn’t a good sign. I mean, I personally don’t care as long as my tax money is not going to be used to fail them out but still.

  • avatar
    Jeff S

    What will happen in the short term the sales of used vehicles will increase and the prices will continue to increase. Long-term there will be less expensive newer vehicles from China and Vietnam after the trade war with China subsides. Small crossovers and small cars that are not selling as well will come back as an affordable option. If this does happen GM and Ford will import smaller and more affordable vehicles made in China and Vietnam and leave the higher profit vehicles to manufacture in the USA. There are still plenty of late model sedans that are available that are still more affordable than trucks, suvs, and crossovers but eventually the supply of cheaper sedans will dry up. GM and Ford might decide to re-enter the entry level market but they will more than likely import them from countries with cheaper labor such as China, Vietnam, and Mexico.

  • avatar
    Jarred Fitzgerald

    All I can say is, “Damn this pandemic!”

    • 0 avatar
      highdesertcat

      Nevertheless, it is here. Although it was never a question of “if”, but a question of “when” another pandemic would emerge, the way that China handled the Wuhan virus outbreak was akin to unleashing a biological weapon on the planet.

      Other virus outbreaks like HIV, West Nile, Ebola and Zika were handled effectively and contained.

      #BOYCOTTCHINA

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