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Used cars have become pandemic gold.
Sellers are commanding lofty prices for their trade-ins. Buyers unable to score a brand new set of wheels due to supply shortages are scrambling to get their hands on late-model rides.
And for AutoNation and other dealers, it’s a great time to be in the car business. The Fort-Lauderdale-based auto retailing giant reported a whopping $7 billion in quarterly revenues and record profits on Monday — much of it on the strength of “pre-owned” auto sales.
“With demand outpacing supply, manufacturers are unable to increase their available inventory,” he added. “And with a limited supply of new vehicles, many consumers are opting for pre-owned vehicles.”
He said the company has “aggressively moved to increase our availability of pre-owned vehicles.”
David Menten, president of Sawgrass Ford in Sunrise, said the usual flow of business — where new car sales outpace those of used cars by 2-to-1 — has “flip-flopped.”
“We sell by 3-to-1 used cars to new cars right now,” he said.
New or used, consumers are opting for modes of transportation that they believe will keep them safe from COVID-19, executives say. Although the airlines have welcomed back millions of travelers from months of hibernation at home, many people prefer their personal cars or trucks as their primary means of travel.
But buyers have been forced to opt for older cars or trucks as big automakers try to recover from a worldwide shortage of computer chips that slowed output.
That’s created windfalls for sellers who are getting unheard of deals for vehicles that usually start to depreciate the moment they are driven off a dealer’s lot.
Marc Riley, chief operating officer of the Rick Case Automotive Group in Weston, said people trading in their cars are “getting an inflated amount of $3,000, $4,000 or $5,000 beyond what their car was worth six months ago,”
Riley said that last week, a customer who wanted to buy the car he had been leasing drove away with a new car, a monthly payment that was $50 lower than before and a check for $1,000.
“It’s created a huge windfall for the dealers and consumers to take advantage of a car they thought they were leasing or financing and never assuming they had positive equity,” he said.
“I’m not complaining,” Riley said. “Profits have never been higher.”
And consumers are paying more for their used cars.
Edmunds.com, a car shopping website, found the average sales price for cars with 100,000 to 110,000 miles on their odometers rose to $16,489 in June compared with an average of $12,626 in June 2020.
The U.S. Bureau of Labor Statistics said last week that the Consumer Price Index showed prices of used cars and trucks soared by 10.5% in June. The spike accounted for more than one-third of the increases for all of the items in the index, the bureau said.
Menten, of Sawgrass Ford, warned that many buyers may well end up paying more for the vehicles they buy next as dealers slap various charges and fees onto the purchase prices.
“I’ve seen ‘trade reconditioning charges,’ which is ridiculous,” he said. “They are popping up everywhere. I would challenge consumers out there to pay attention to what they are actually paying for.”
The overwhelming traffic in used vehicles doesn’t mean buyers are shut out of the new car market. Dealers have created priority order lists for customers who are willing to sign up and put down a modest refundable deposit.
Last month, Sawgrass Ford launched a “First in Line” program where customers can order the car or truck of their choice.
“Anyone can order a new Ford vehicle and be placed in an order queue as soon as production begins,” Menten said. The idea is to put customer retail orders ahead of vehicles manufactured for dealer display.
“You get the exact vehicle you want — color, trim and options,” he said.
No one has a firm idea when a steady flow of new cars will pick up again.
Said Riley: “My crystal ball has always been foggy, but we’re thinking at least through the first quarter of next year.”