How will used-car dealers adapt to the COVID-19 impact?

11 May 2020

In a detailed update to Autovista Group’s whitepaper, How will COVID-19 shape used car markets?, we look at the latest scenarios the impact of the coronavirus (COVID-19) will have on used-car markets in Europe, how dealerships may need to adapt to economic challenges and discuss the effect on residual values.

Economic losses continue to build as markets remain shut. Pressure on dealers will rise to turn stock around quickly, once they re-open. During the ramp-up phase and throughout the rest of this year, it will be important for OEMs to support dealers financially and help them to install appropriate programmes and tools to engage with customers.

For dealers, it will be pivotal to avoid giving in to the temptations of discounting. The period after the lockdown will be characterised by uncertainty around how customers will react to the stricter rules of engagement. It will tell us how big the appetite is to shop for a car. It is a time without precedent and one that sets the tone for any upcoming phases. Mistakes made during this period may affect dealerships going forward.

In times of economic uncertainty, flexibility is key. Long-term financial commitments are challenging to obtain. This may be the time for used-car leasing and subscription models to see a surge in demand. Such business models would help soften the crisis during this transitional period. Individually, dealers and dealer groups can think about creating intriguing offers for smaller businesses and fleets.

Online options

The coronavirus pandemic has painfully proven that the lack of digitisation of the automotive sales and marketing value chain is a burden that the industry must overcome. In the absence of access to shops and dealers, customers have continued to focus their attention on e-commerce. An omnichannel strategy will be more resilient than other single-channel strategies. 

′Alternative concepts for keeping up the business in the digital space may prevent dealerships from going out of business, especially when considering a possible second or third wave of the pandemic,’ according to Roland Strilka, director of valuations for Autovista Group.

Residual values

France and Italy expect the biggest hit on used-car values to occur in 2021, after a more moderate decline in 2020 (France -1.5%; Italy -1.0%). Both expect the supply shortage of new cars to soften the blow. The full effect of the crisis should be visible during 2021.

Italy is particularly exposed to the coronavirus pandemic dragging into a full-blown economic crisis which would affect private demand for used cars for a longer period. Italy has lowered its forecast compared to the last version of this report.

Marco Pasquetti, forecast and data specialist at Autovista Italia, comments: ′We expect a substantial impact on RVs in the area of 5%, but it will materialise in 2021 rather than this year. This is because many people who used to move by public transport before the lockdown will need to switch quickly to private vehicles, and the supply shortage of new cars will support the private demand of the used market in the short term.’

This whitepaper gives further details on residual values post-coronavirus and the varying scenarios that dealers in European counties may encounter as lockdowns ease. You can read the full paper here.