Park your unused vehicles during economic downturn. Don't sell at a loss. Here's why.

How will you land on your feet after and economic slide? Know what to do with vehicle assets.

preowned cincinnati work vans

During an economic downturn you may find your business with unused vehicles and a lot of unanswered questions. With this in mind, you could be thinking of selling off those assets to free up cash. Unfortunately, there could not be a worse time to sell. Due to the state of the vehicle market, stoppages in OEM production and a severe decrease in retail demand, selling off when the economy is not doing well will result in losses — both now and later.

This is no time to panic. We’re all in this together! Mike Albert is charging ahead and preparing for what comes next. We invite you to rely on us to help you manage your fleet and make crucial decisions that will assure you come out of this on your feet. We’re keeping tabs on the industry and will be here to support your business — developing a strategy that fits your situation.

How can we help?

Recently, one of our partners decreased their field team by 40%. Mike Albert helped them look at each asset and update their finance strategy to improve cash flows in the short term (in order to accommodate their sudden decrease in revenue). We also advised our partner to hold onto assets instead of defleeting since the wholesale resale markets are depressed. When the economy opens again they will be poised to quickly redeploy revenue generating assets to meet their clients demand.

Projections for the pandemic impact on new and used vehicle sales.

So what do we know?

  • As Manheim moved to only digital simulcast sales last week, they saw transactions fall 45% YOY.
  • Wholesale activity has nearly frozen. Volume was down 52% week-over-week. People are not selling vehicles at auctions because retail demand has dropped off, resulting in substantially lower prices.
  • The large used car retailers like CarMax, Carvana, and DriveTime have paused their buyers from buying vehicles. Prices on what few units were sold were down about 5% in one week.
  • J.D. Power indicated this was the largest weekly drop in units sold that they have observed since back to at least the year 2000.

The Bottom line: when looking at the wholesale resale market we know that vehicles are not selling as quickly and when they are selling, it is for much lower prices. Our average days to sell is usually around 30 days, with sales performance around 100% of the wholesale market value. Selling right now, if there is interest at all, would be in the 10-15% range below previous sale price values.

So where do we go from here?

Mike Albert is advising customers to hold on to vehicles, park them if you must! Otherwise, you will be “selling low” now and “buying high” later.

We know that for now, vehicles are not selling as quickly and when they do it is for much lower prices. We can predict, due to OEM slowing and ceasing manufacturing of new vehicles, that when the economy opens again there will be a relative scarcity of new commercial vehicles. Additionally, wholesale resales should return very strongly as the pent-up demand for vehicles may not be satisfied by new vehicle inventory.

One bit of caution, which we will be monitoring, is that if the shutdown draws out for too long then there could be an excess off-lease inventory. This has the potential to cause an oversupply of used vehicles until that pipeline is depleted.

Positive signs for a bounceback:

  • The $2 trillion dollars federal stimulus package should provide some financial relief to both consumers and businesses, which will be essential for recovering from where things stand today in almost complete shutdown.
  • The Fed continues to be doing everything within its power to keep financial markets stable and functioning, which is critical.
  • As new car production has slowed or stopped with some manufactures, the availability and higher pricing of new cars could push more consumers to the used sector. Used cars are also historically more popular after financial downturns and especially with demographics hit harder by a recession, as used vehicles are seen as sensible purchases for less money.

Mike Albert’s current stance is to avoid selling at the depressed prices we are seeing in the wholesale market with anticipation of the slowdown being short-lived. However, we are also using technology to sell vehicles digitally in national marketplaces through upstream remarketing channels at higher market values. As a general rule, we are informing clients that selling large quantities of vehicles in the immediate future may not be in their best interest.

We stand ready to support your business and to help you develop a strategy that fits your situation. Call your rep if you’re a current partner. Reach us here if you're not a partner currently but are looking for answers.

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