If you’ve been a regular ride-sharing customer now thinking about buying your own car, you could be part of a trend that is pumping new life into the auto industry.
Just months ago, the idea of personal car ownership seemed as quaint as watching movies on a VCR. But as the coronavirus (COVID-19) shut down the economy and instituted social distancing as standard practice, new and used car sales surged.
AutoNation, the nation’s largest dealership group, reported adjusted third-quarter profits of $2.38 a share, an increase of 102 percent compared to the third-quarter of 2019 and an all-time record.
CEO Mike Jackson says there is little doubt that the pandemic has changed the environment, most likely for the foreseeable future.
“I think this pandemic/shelter in place has shifted the American psyche in a long-term way,” Jackson told CNBC. “Coming out of the lockdowns, they said, ’So much for sharing everything.’”
Meaning consumers who felt they could get along just fine without owning a car now see the advantage of having their own wheels.
Demand rising in all price ranges
Jackson says AutoNation is seeing rising demand for all types of vehicles at all prices. He said sales have also been boosted by “incredibly low” interest rates, meaning consumers can qualify for a more expensive vehicle than they might have at a higher rate.
Because inventory levels have been low since auto plants shut down for several weeks during the spring, dealers have had more pricing power and offered fewer incentives. As a result, consumers are paying more for the cars they’re buying.
Earlier this month, Kelley Blue Book (KBB) reported that the average transaction price (ATP) for a new vehicle last month was $38,723, up 2.5 percent over September 2019.
At the same time, car dealers are finding the new ways of selling cars, through online transactions and at-home test drives, increasing efficiency and raising profit margins.
AutoNation reports third-quarter same-store gross profit totaled $972 million, an increase of 11 percent compared to the same period a year ago.
None of this is good news for the ride-sharing industry. A CarGurus survey conducted early in the pandemic found an immediate sharp decline in the number of consumers planning to use a ride-sharing service.
It found that 40 percent of consumers wanted to use rideshares less or not at all, while 49 percent said they would instead use their own vehicle.