How COVID-19 is Affecting Auto Loans
COVID-19 is having a massive impact on the global economy and very few industries have been untouched by it. If your business relies on employees working in a physical space and profits only when people are willing to shop and spend, there’s no escaping it.
Find your best rate on Car Insurance!
Attention: Still Open During the Financial Crisis...
Tip: Act now to see if you qualify for lower rates!
Compare free personalized quotes from the nation's top providers.
It’s no surprise, therefore, that the auto industry has been so negatively affected. In a recent guide, we looked at the many auto loan relief options that manufacturers offering in light of the coronavirus. In this guide, we’ll highlight the ways this industry has been stung by the pandemic and look at what it means for the future of the US automobile and car financing sectors.
How is the Coronavirus Affecting Car Sales?
The automobile manufacturing industry experienced a minor surge at the beginning of 2020 but COVID-19 began to impact sales heavily in March. Many companies, Fiat Chrysler and General Motors included, began the year with strong momentum behind them, but March hit them hard and negated all the gains made during the first two months.
Both of these companies recorded losses for the first quarter of 2020, with Fiat Chrysler losing 10% in total.
Toyota, one of America’s biggest manufacturers, also recorded massive losses for March, with daily sales dropping by nearly a third during this month.
All of this is to be expected. The US has yet to announce the sort of national lockdowns we have seen in countries like the United Kingdom, Italy, Spain, and Greece, but many citizens are in self-isolation, countless businesses have shut their doors, and there are fewer cars on the road as a result.
Combine this with the fact that people are losing their jobs and worrying about their futures, and it’s easy to see why car sales have been affected so severely.
What are Manufacturers Doing About It?
Automobile manufacturers have moved quickly to stem the rising tide of financial devastation caused by COVID-19. Fiat Chrysler, for instance, is offering improved auto loan conditions to convince consumers to make sizeable purchases and keep the wheels turning. It has also made it easier to purchase a car for those in self-isolation or lockdown.
You can now buy a Fiat Chrysler online, with options for trade-ins, auto loans, and pretty much everything else you would get when buying in person.
They’re making it easier for you to buy because they need you to make that commitment. At the same time, the production of many new vehicles has been halted.
While some plants and showrooms are still open in the United States, Europe has experienced an almost continent-wide shutdown, leading to a decreased demand.
Manufacturers are also anticipating that things will get worse, as many experts predict that the USA will experience a spread similar to that of Spain and Italy.
How Has COVID-19 Hurt the Automobile Industry?
We have already touched upon some of the ways that COVID-19 has impacted the automobile industry, but the problem goes far beyond people not being able to make it to their local showrooms. Furthermore, if events in Europe are anything to go by, the problems will only get worse and it could be several years before the automobile sector recovers.
Here are a few reasons the industry has been hit hard:
There is a genuine fear that the COVID-19 pandemic will remain for all of 2020 and even beyond that. It seems unlikely that it will last for that long, but if the country doesn’t go into lockdown and a vaccine isn’t produced, it’s possible.
With this in mind, many consumers are putting off buying new cars out of fear that they simply won’t need them. New cars depreciate rapidly and can lose 20% in the first year. What’s the point of spending $30,000 on a new car if it will be worth $24,000 by the time you actually get behind the wheel?
Struggling Stock Markets
The stock market doesn’t just impact big companies and investors. It also affects average American families who have their money tied into savings accounts, stocks, and pensions. Savers have lost a lot of money and are worried that they’ll lose even more in the near future, making buying a $30,000+ vehicle incredibly reckless.
Price of Gas
One of the few things that the automobile industry has on its side is the price of fuel, which has plummeted in the past few weeks. The problem is, no one cares about the price of fuel when they’re stuck inside the house worrying about their health and their jobs.
Automotive plants can’t simply shut down for a few weeks and then start up again when everything has cleared up. Many plants were already struggling to keep things together and once production stops and their profits disappear, they may close down entirely, taking hundreds, if not thousands of jobs with them.
Bottom Line: Car Sales After COVID-19
It’s highly likely that the hard times will continue for the manufacturing industry. As the coronavirus continues to spread across the country, manufacturing plants will struggle to retain employees, showrooms will shut, and fewer Americans will be willing to pay the $30,000+ required for a new vehicle.
Whether this impacts the future price and availability of automobiles remains to be seen, but it’s highly likely that we’ll see some massive changes in this industry. America’s best-loved manufacturers will lose millions and could be sent to the brink of financial destruction, while many salespersons and mechanics will likely lose their jobs as demand drops and garages/showrooms close down.