FIRSTLOOK MARKET ALERT: COVID-19 IMPACT #1

EXCLUSIVE CLIENT BRIEF

Mike Cavanaugh, EVP MAX Digital, shares full FirstLook Market Alert presentation.

FIRSTLOOK MARKET ALERT: COVID-19 IMPACT #1

Executive Summary

Disruptive economic shocks from COVID-19 require a different way of doing business.

FirstLook will be making available crisis specific market insight tools and market alerts.

  • Insight #1 – Consumer demand and the wholesale markets are frozen. Your pre-owned inventory is worth significantly less. Your 1-3-year-old inventory is most as risk and needs to be managed aggressively.
    • Current pre-owned unit values:  $2,300-$6,800 less within 60 days of market reopening
    • Auctions:   Extreme no-sale rates as remarketers prepare for market recovery
    • Off Lease Cars:  4.1 million units coming in 2020 (60% more than 2015)
      • 1.8 million are due between March and July, well ahead of forecasts
      • Finance companies are extending leases, increasing excessive supply and
        depressing prices
    • OEM incentives will spark new car buying, depressing values of 1-3-year-old pre-owned cars

RECOMMENDATIONS:

#1 – When the Markets Reopen – Retail Out of Your Pre-Owned Inventory Quickly

  • Dealers who retail out of unrealized losses early will be positioned to lose less
  • Funds will then be available for great buys when the market resets
  • Avoid trade-ins at pre-crisis values – FirstLook feature coming in May for alerts

#2 – Wait for the Value Reset to Stabilize, then Stock Fresh Pre-Owned Inventory

  • Reduced consumer confidence has reduced demand
  • Off-lease inventory needs to work its way through the wholesale system
  • New car incentives need to be priced into 1-3-year-old model wholesale values

#3 – Be Ready to Stock “nearly new” units, especially pickups and larger SUVs

  • After market settles, 2-3-year-old units likely selling 50+% below MSRPs
  • Consumer frugality will mean more pre-owned, even prime credit buyers
  • Low fuel prices/low interest rates will mean higher truck and SUV demand

  • Insight #2 The sub-prime financing bubble is popping; Don’t count on strong sub-prime financing capacity in the second half of 2020.

RECOMMENDATIONS:

#4 – Move up market while you still can. Diversify where possible.

I’d like to hear more from my MAX account lead