For Lee Willis, general manager of the North Park Lexus dealership, 2020 has been a good year — even better than last year, pandemic be darned.
Despite closing down the showroom in March and April, sales at the luxury car dealership — which have been red hot in recent months — will top last year’s totals, Willis said.
“We gave up half of March and all of April — that tells you how blistering it’s been since then,” he said. “We’ve been selling new vehicles as fast as we get them.”
The Lexus dealership’s sales mirror a national trend: New luxury SUVs and trucks are flying off car lots, but sales of lower-priced car models and used vehicles have stalled out.
Lexus’ two top-selling vehicles are its SUV models the NX and RX, with prices starting at $37,500 and $45,000, respectively, according to Edmunds.com. Sales of both vehicles were up last month compared with a year earlier.
At Mercedes-Benz of San Antonio, business in recent months has been nearly unchanged compared with last year.
“We had a very good October,” said Alfonso Cavazos, the dealership’s general manager. “I wouldn’t say we were breaking any records, but it was almost pre-COVID.”
The so-called K-shaped economic recovery appears to be underway — where upper-income earners are emerging from COVID-19 downturn largely unscathed while lower-income workers continue to struggle.
“We’re seeing the lower-end new car business a little softer — as an example, the Corolla, the Camry,” Willis said. “A lot of people that are in industries like hospitality have been hit hard. The lawyer that’s buying a Lexus hasn’t been hit like the guy that’s working at Rosario’s.”
The U.S. auto market was thrown off balance when vehicle manufacturing plants were forced to shut down in the spring as the coronavirus began spreading throughout the nation.
Factories didn’t turn out new cars; supply chains were disrupted; and car owners weren’t trading in their old vehicles for new ones.
Sales of new and used vehicles plummeted, and the average price of used vehicles in June was at the lowest level since the Great Recession, according to the Bureau of Labor Statistics.
But with new car production halted in the spring and new car buyers still hesitant, the flow of vehicles into the used car market began to slow.
“Inventory levels of used vehicles started to fall dramatically because the normal supply channels to the used market, like off-lease vehicles, trade-ins — all that was depressed, and there wasn’t as much supply coming into the used market,” said Charles Chesbrough, senior economist and director of industry insights at Cox Automotive.
Supply and demand kicked in. With fewer cars to buy, prices of used vehicles jumped 15 percent from June to September. That’s the largest three-month increase on record, according to the BLS.
People trading in their used vehicles were getting more cash than before to put toward new cars, dealers said.
Meanwhile, the price of new cars this year has remained high, but stable. The average listing price for new vehicles in October was over $39,000, up from just over $37,000 in March, according to Cox Automotive.
Total U.S. vehicle sales in September and October were up in both months compared with a year earlier.
But sales of used vehicles last month were down 5 percent compared with October 2019, Cox analysts reported.
At used car lots throughout the city, dealers have seen business plummet this year, and at times have had to sell cars at a loss.
“I would say we probably took a 70 percent hit” to business, said Michel Sexton, owner of Cloverleaf Auto Group, a used car dealer off Perrin-Beitel Road.
Before the pandemic, Sexton said he typically had about 40 cars for sale on his lot. This month, he has about 16 vehicles for sale. With used cars more expensive to buy, he said he’s held off on purchasing used vehicles that he may not currently be able to sell at a profit.
“I’m not going to put myself in a situation purchasing a car for more than it’s worth,’ Sexton said. “I would rather just not buy a car.”
Things are starting to improve, however. Used car prices fell slightly in October, and Sexton said business has picked up at his dealership so far this month.
But the fluctuations in price of used cars amid the pandemic has thrown local dealers off.
The North Park Lincoln dealership’s used car office purchased vehicles earlier in the fall when the price peaked. Now, salespeople have had to sell them at a loss of up to thousands of dollars per vehicle.
“Two months ago, prices had been astronomically high” for used cars, said Chad Armstrong, sales manager at the dealership's used car lot. “We paid (a higher price) for a bunch of cars, and now that the market has dropped and we have to sell them, we sold them at a huge loss.”
Dealers of both new and used cars said another business shutdown meant to contain the spread of COVID-19 cases would put a major damper on the auto industry.
“What will happen going forward — COVID is going to control that,” Willis said. “We’ll have to see how San Antonio responds to the spike that is starting again.”
An additional stimulus package from the federal government would likely help lower-income workers afford vehicles again. And it could also give upper-income buyers even more confidence to purchase a new car.
“Buyers with high incomes remain in the auto market. The market weakness is in lower-priced segments, such as compact and subcompact cars,” Chesbrough, the Cox economist wrote in an analysis this week. “That suggests the vehicle market is an example of the K-shaped economic recovery, where higher incomes do well, while lower incomes do not.”
Diego Mendoza-Moyers covers manufacturing, the automotive industry and the energy sector. To read more from Diego, become a subscriber. diego.mendoza-moyers@express-news.net | Twitter: @dmendozamoyers
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November 14, 2020 at 07:00PM
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Luxury auto dealerships roaring as used car market stalls in uneven pandemic recovery - San Antonio Express-News
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