It is believed that generous discounts will play a significant role in kicking the U.S. car market back into gear after the coronavirus pandemic.
Car manufacturers across the industry have experienced waning car sales as the unemployment rate across the country soars and lockdown orders force people to stay at home. Last week, Toyota said its sales plunged by 54 per cent in April while Hyundai and Mazda saw drops of 39 per cent and 45 per cent respectively.
To encourage shoppers to get back into the market, many automakers have started to offer no-interest loans for up to seven years. Speaking with Reuters, auto retailer Sonic Automotive’s chief executive David Smith said incentives pushed sales higher in late April and may be able to boost them further in the second and third quarters of the year.
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In a recent online interview with The Washington Post, Ford chief executive Jim Hackett added to this hope saying, “My belief is that demand will come back very well.”
What could hurt the new car market is the fact that consumers in tough times like these typically prefer to buy used cars. There are more than 4 million low-mileage, lease vehicles set to return to the market this year and this could push used vehicle prices down in the near term, impacting new vehicle pricing and demand.
Cox Automotive economist Charlie Smoke says competition will be fierce when off-lease customers return to the market. This has prompted some car manufacturers to extend leases to keep their vehicles out of the used car market.
