‘A weird market … a weird year’: COVID driving used car sales in Reno-Carson and beyond | nnbw.com
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‘A weird market … a weird year’: COVID driving used car sales in Reno-Carson and beyond

A Carson City Hyundai sales person shows a customer a new car at the dealer’s lot at 3659 S. Carson St.
Photo: Carson City Hyundai

RENO, Nev. — At Crawdaddy’s Used Cars in Reno, the car lot hasn’t looked the same since the coronavirus pandemic rolled into Northern Nevada.

Once filled with up to 40 used vehicles week after week, Crawdaddy’s has been averaging about 15 used cars on site over the past 6 months, said salesperson Gary Ferrick.

“We’ve been trying to keep up so that we don’t look like a parking lot instead of a car lot,” Ferrick said with a laugh.

Showcasing a stockpile of pre-owned vehicles rather than a smattering hasn’t been easy for any dealer across the country.

Consumers have been snatching up pre-owned vehicles at a historic rate during the coronavirus pandemic. In June, Edmunds.com found that franchised car dealers sold 1.2 million used cars and trucks, a 22% increase from June 2019.

All told, it was the highest monthly total since at least 2007. A month later, in July, there was a 22% drop in the number of used vehicles available at U.S. dealerships, according to Cox Automotive.

For dealers like Crawdaddy’s, the lack of supply on local lots has been compounded by not being able to go to live auto auctions in neighboring California, where auctions are strictly online due to COVID.

This, Ferrick said, is not ideal when bidding on pre-owned vehicles to add to their lot.

“We can go online and bid and take a chance on what you’re getting, but we haven’t inspected the vehicle to see what has to be done to it,” said Ferrick, noting that sales at Crawdaddy’s have experienced about a 30% drop-off over the past few months.

FLOODING THE MARKET

The used car boom is a culmination of multiple factors, according to dealers who spoke with the NNBW.

Perhaps the primary driver for the uptick in consumers racking up cars, old and new, is to avoid public transportation or Uber rides during the global health crisis, said Ryan Dolan, CEO of Reno-based Dolan Auto Group.

A Dolan Auto Group product specialist, right, helps a customer at Dolan Toyota at 2100 Kietzke Lane in Reno.
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“Ridesharing and mass transit, those things aren’t very well equipped for a virus or a pandemic of worldwide proportions,” Dolan said.

Ferrick agreed, saying that consumers are opting to invest in a used car rather than pumping money into a rideshare driver’s account.

“In our segment,” Ferrick said, “a lot of people that were taking Uber, they’re saving their money and buying a used car because they can make the same payment with what they were paying Uber.”

Others are simply trying to save money amid continued economic uncertainty, taking the frugal route with a used car payment in case a layoff, furlough or cutback in hours is around the corner, Ferrick noted.

Not to mention, after COVID slammed the brakes on the U.S. economy in mid-March, automakers stopped production of new cars for nearly two months. As a result, the demand for older cars was accelerated by the lack of new-vehicle inventory.

“The new-car market was pretty tough because they had shut down the factories for six or seven weeks,” Dolan said. “And there was a lag in the supply chain. So those months were pretty tough for the new cars as far as volume went, and used cars reaped the benefits of that. There was an uptick is used car buyers because the new cars weren’t readily available.”

Consequently, Dolan said, the values of used cars have “skyrocketed” — a shift in the market that typically sees listing prices decrease over time due to depreciation. As evidence, Edmunds data show the average price for all used vehicles climbed to $21,558 in July, a $708 increase compared to June.

‘PRE-COVID NUMBERS’

Some dealers are even seeing the price inflation of pre-owned vehicles push consumers toward buying a new car.

John Napoleon, dealer principal at Carson City Hyundai, says he’s seen an increase in new care sales due to the rising cost of used cars — making it more justifiable to go new.
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John Napoleon, dealer principal at Carson City Hyundai, said his used car sales are down about 10% compared to last year due to the market’s high prices and low inventory. New car sales, meanwhile, are up roughly 40%, he said.

“Because the used car prices are extremely high, it’s easier for someone to justify a new car,” Napoleon said. “If you have a one- or two-year-old used car that is a lot of money, you might be able to get into a new car for a couple thousand dollars more.”

Dolan, who told the NNBW back in the spring that April was the dealer’s “worst month on his watch,” said business overall has been an uphill climb since, thanks to its new-car inventory “beefing back up.”

“Last month, five out of our seven outlets sold more new cars than they did the previous August,” said Dolan, adding that September’s new-car sales are outpacing last year’s numbers. “We’re talking pre-COVID type numbers, so it’s pretty good for us.

“It’s been a weird market, it’s been a weird year. I wouldn’t have predicted the success we had over the summer.”

ON THE HORIZON

Heading into 2021, Napoleon expects sales to be “very flat” for a while, citing the impact of unemployment benefits drying up, and a lack of consumer confidence.

“I don’t see consumer confidence as being real strong — that’s more of a gut-feel,” he continued. “It seems like customer confidence is waning a little bit and I think this recovery is going to be longer than we think.”

Pausing, he added: “But it changes minute by minute. The trend is … there is no trend.”

Dolan, meanwhile, hopes the industry continues to trend upward as summer rolls into fall. But after experiencing the sales crash of spring 2020, he’s prepared for anything.

“I think if there’s some sort of a vaccine and sense of normalcy, I think we could ride this economy for another year or two if that happens,” he said. “But if we’re stuck in the doldrums again and we go through a flu season and there’s a bunch of sickness and death and jobs are lost, it could get ugly.

“So, I think it’s either going to continue to be really good or it’s going to drop off the map.”

As for used car lots like Crawdaddy’s, Ferrick says regional dealers are going to see an upswing in inventory by the end of the year. Why? He pointed to the unfortunate fact that creditors will eventually start to repo cars from people that haven’t made payments for 90 days or longer. 

“That’s going to be happening soon, and then the market will once again be flooded with used cars,” he said. “And the prices will drop to where we can buy them at a good enough price to sell them at a profit.”