If there’s anything good that could come from the COVID-19 pandemic for the automotive business, it’s that used cars have become a hot commodity.
People are now willing to pay more for used vehicles. With new vehicles almost unavailable in dealerships, consumers are funneled into the used-car market, causing an increase in the cost of used cars. This unconventional setting has altered dealerships’ sales and profit.
"All will deliver record earnings,” Guggenheim Partners analyst and dealership stock expert Ali Faghri told The Drive. “I think prices have probably peaked. But these market conditions will probably continue until 2023."
AutoNation is reportedly on track to have 130 stores selling nothing but used cars by 2026, according to The Drive. Its second-quarter earnings reflect high demand. Compared to its new-vehicles sales, used-car revenue for the second quarter increased by 32% compared with the same quarter in 2019. It recorded a 12% bump in new vehicles sales for Q2 of 2021, compared to Q2 of 2019. The dealership group also recorded growth in its overall revenue by one-third compared to the second quarter of 2019.
The demand for private automobiles is up due to the pandemic, The Drive reported.
AutoNation CEO Mike Jackson noted that the market demand continues to outpace the supply for new vehicles. He expects this pattern to continue into 2022 “due to consumers' preference for personal transportation coupled with lower interest rates."
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