The deterioration of used-vehicle values and decline in total sales volumes during the latter half of March provides a glimpse of the severe drop-off the market will experience in April as a result of the COVID-19 crisis.
The usual spring bounce that began in the first two weeks of March in the used-vehicle market was cut short by shelter-in-place directives and record unemployment, Jonathan Smoke, chief economist at Cox Automotive, said during the Manheim Used Vehicle Value Index call today.
Used retail SAAR for March dropped 13.5% year over year to 17.3 million units, despite strength during the first two weeks of the month, which was the start of tax-refund season. The Manheim index lost some of its value when compared with February, landing at 141.9, a 1.1% decrease.
The index, however, posted a 4.4% YoY increase.
On the new-vehicle side of the business, retail sales plummeted 40.5% YoY in March, leading to a new retail SAAR of 8.7 million for the month. March’s new vehicle SAAR is the lowest monthly retail SAAR since February 2010, following the credit crisis.
Looking forward, declines in April are expected to be “much more severe” than March, Smoke said, noting that consumer sentiment will be a leading indicator of how the auto market will recover. Consumer sentiment on Morning Consult, a daily sentiment index of 15,000 people, was down 28% since the end of February.
Additional jobless claims this week are expected to come in at 6 million, according to Market Watch’s median forecast, adding to the 10 million jobless claims filed in the last two weeks of March.
The U.S. has lost more jobs in the last two weeks of March than during the entire Great Recession, Smoke noted. “We could see unemployment reach 10% to 16% as a result.”
To put the impending recession into perspective, Smoke said, “The economic contraction in March and [the second quarter] could be worse than at any point since World War II.”