Economic challenges or no, consumers still need to get where they are going, and many are now opting for secondhand sellers when buying vehicles, unable to justify the price of buying new.
In March, according to Cox Automotive, used vehicle sales were up 19% month over month and 11% year over year, reaching the “highest volume since March 2022.”
“Affordability matters more than ever to consumers, and declines in used-vehicle prices help offset higher interest rates,” Jeremy Robb, senior director of economic and industry insights at the automotive services company, said in a statement. “Once tax return season got underway, many consumers had more income to use as a down payment, driving customers into retail dealerships.”
Last week, CarMax reported a modest increase in retail sales of used vehicles in Q4 FY 2024. Additionally, on Tuesday (April 16), Cars.com shared its Affordability Report, noting that 55% of shoppers “were rethinking their new-car purchase because of high interest rates,” and 53% intend to finance their next vehicle.
“While prices are down, they’re still nowhere near pre-pandemic levels,” Cars.com news editor Stef Schrader commented in a news release announcing the report.
Overall, shoppers continue to buy cars, even in the face of budgetary pressures, according to the 2023 PYMNTS Intelligence study “New Reality Check: The Paycheck-to-Paycheck Report — The Economic Outlook and Sentiment Edition,” which drew from a census-balanced survey of nearly 4,00 U.S. consumers.
The study found that roughly one in three shoppers were very or extremely likely to purchase a new car or another vehicle in the next year. Perhaps unsurprisingly, those who make more than $100,000 annually were the most likely to make such a purchase in that time frame.
Yet where possible, consumers are picking less expensive options. The February/March 2024 installment of the same series of reports, “Why One-Third of High Earners Live Paycheck to Paycheck,” revealed that half of consumers have turned to cheaper retail merchants due to retail product price increases. Plus, 45% of low-income shoppers (those who make less than $50,000 annually) and 41% of middle-income ($50,000 to $100,000) shoppers said they had traded down on quality in the previous year.
To that point, inflationary challenges have consumers seeking more preowned products. The January PYMNTS Intelligence study “Consumers Shop Secondhand Stores as Often as Other Retail,” which drew from a survey of more than 2,300 U.S. consumers, found that 43% of consumers purchased a secondhand product in 2023. Among those, 11% bought automobiles.
Economic pressures’ effects on consumers purchasing behaviors are likely to continue as challenges persist. The “The Pessimism About Pay Rises Offsets the Effect of Falling Inflation” installment of the New Reality Check report found that 83% of consumers say they are at least somewhat concerned about near-term economic conditions.
The rise in used vehicle sales reflects a growing trend toward affordability and financial prudence, as consumers navigate economic challenges. While some may lament the persistence of high interest rates and inflationary pressures, individuals across income brackets are adapting, opting for secondhand options and prioritizing value. As demonstrated by recent studies, the resilience of consumer demand remains evident, albeit tempered by budgetary constraints.
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