Pandemic? Declining sales? Recession? How to get cash for junk cars in Nashville, TN, and other cities? It turns out that our market will soon run out of used cars. Not even a million will be available. This is the result not only of the pandemic but also of the production and procurement policies of recent years. Do you remember the sales of vintage cars?
Fashionable a few years ago, today they are practically gone. Why? The JunkCarsUS team finds out.
In the past, I hate to use the word, but unfortunately, that’s how it was, factories produced as many as they could. For the so-called square, or stock. There was demand, and there was production. Eventually, one day all those cars would sell at most at a bigger discount. And so vintage sales were invented. To get rid of old/new cars from the yards.
But astute accountants scratched their foreheads and calculated why produce for stock and sell at a smaller profit when you can adjust production and sell at a normal price.
Well, the pandemic came. On top of everything, there were car price hikes, restrictive emission standards no less, and the coronavirus. Remember the media storm about cars not being sold due to not meeting strict emission standards? It’s not a fairy tale, it’s reality.
- If any of the corporations were left with a yard full of cars homologized for the now-defunct Euro6/6a standard, they could give them up for scrap at best.
- A few hundred cars can be allowed into the market by registering “at the dealer.” But several thousand? No one can afford it. That’s why production was limited.
- At the time, no one worried that one day a market would run out of used cars.
What’s more, unwanted cars are not worth reworking, disassembling, or recovering components from them. They must be disposed of. That’s why thousands of Volkswagen still remember the Dieselgate affair drying in the desert in the United States. The German giant’s bosses probably dream that a sandstorm will take them away.
Cab? No, thanks
And what about that demand? Since June 2020, interest in used cars has increased by as much as 12 percent. Used cars are primarily sought by those who have not previously owned a car at all.
According to the ISR 2020 Report, the greatest demand is for small city cars with small, economical gasoline engines. There are no miracles, you won’t get a new car for such money. A fresh used one, too. So, about ten years old and quite run-down cars are involved.
In our new reality, a car is simply indispensable, both daily and in emergencies. Public transportation, cabs, and other solutions, such as carsharing, come with significant limitations and additional risks. And yet, no one wants to risk the health of themselves and their loved ones.
I will not sell, I will still drive
To make matters worse, the natural cycle of car replacement has been swirling. The supply of cars from private owners is noticeably lower. This is due to the not-so-good buying mood.
Owners of cars from the cheapest segment, in fear of losing their jobs, are simply reluctant to change to new or younger cars. The reasons are various, concern about the financial situation related to what is happening in the job market, reluctance to “over-eat” savings, and the fact that we drive less in the new reality.
Seeing the uncertain mood of customers, dealers are also changing their approach. They are reducing the number of cars in stock for fear that they won’t sell them. The total supply has decreased by nearly 24 percent. After all, it’s better not to have a car than to be left with a yard of old models.
It is not insignificant that with the first wave of the pandemic, many corporations closed their factories. The effects of this are still being felt today. 24 percent fewer new cars were delivered to the market in 2020. Sub-suppliers, who also halted production, are not only unable to deliver orders, but on top of that, they are facing problems from their sub-suppliers. This is because the entire supply chain has been compromised. And it could take up to several years to return to normalcy. Already know why there will be a shortage of used cars on the secondary market.
The pandemic continues, and there are already announcements that production will come to a standstill again. This time due to component shortages and steel issues. It is estimated that this could lead to a reduction in new car deliveries by another 10 percent.
As a direct result, the supply of used cars will automatically drop. So it may turn out that we will be left with our own scrap metal and in really dire condition.
There will be a shortage of used cars
There are three scenarios for the development of this situation. And unfortunately, three are already coming true. First, the market will shrink. Both dealers and sellers of used cars, but also garages and parts suppliers, will earn less.
1. Customers will buy the cheapest cars, which means even older and in even worse technical condition. In addition, drivers will keep and use their aging cars longer.
This trend is already starting to become apparent, in 2020 imported used passenger cars aged another year and their average age is 12 years, compared to 8 years in 2010.
It’s the margin that counts, not the quantity
2. In this whole situation, the most interesting thing is that corporations, despite lower sales, are earning quite well. Of course, it’s hard to look for brands that closed last year on a positive note.
Lamborghini Sian is one of the Italian brand’s more expensive models
3. Lamborghini boasted that last year the Italian brand, owned by the Volkswagen Group, sold fewer cars, but earned more on them. How is this possible? You’ll say that the premium and supercar segments have their own rules. And yes and no. In the case of Lamborghini, only the most expensive ones are sold.
However, manufacturers, including popular brands, are increasingly keen to pay attention to margins. Quantity is important, but it is receding into the background. After all, it’s better to sell a few more expensive cars, which are in high demand all the time, than to waste time on budget cars. There, volume is important, and it’s getting harder and harder to find it.