Mature consumers, a group that’s earned a reputation as big spenders in the automotive market,are lagging behind younger people when it comes to buying vehicles during the COVID-19 crisis.
Consumers over age 55 accounted for 37% of new-vehicle sales in 2019. But sales to them declined 45% from pre-virus forecasts for the week ending April 26, according to J.D. Power.
In contrast, buyers ages 18 to 35 and 36 to 55 were only down 33% and 36%, respectively, from pre-virus expectations.
In most recovering markets, sales to mature buyers trail far behind those to younger buyers, Tyson Jominy, J.D. Power’s vice president-data and analytics, says at the company’s latest webinar on COVID-19’s effect on the auto industry.
Retail sales to buyers over 55, whom Jominy calls “the wealthiest consumer group that buys the most expensive vehicles,” remain the hardest-hit part of the market.
A potential good-news angle to older people staying on the sidelines now: They’ll likely be back when things settle down and people venture out more with the expected abatement of the virus crisis.
“The ace in the hole is, this group will eventually return to the market later with a pent-up demand,” Jominy says.
Th retail sales outlook for the full month of April is 616,000, a 43% decline from the pre-virus forecast, says J.D. Power.
The company sees May as a critical sales month for the auto industry. In the pre-virus forecast, May was expected to be the second-highest sales volume month of the year.
Generous automaker incentives, the expected reopening of dealerships and pent-up consumer demand could collectively drive strong May results, says Thomas King, J.D. Power’s president-data & analytics and chief product officer.
Other highlights from the company’s weekly report on the virus’ impact on the industry:
- All markets are in recovery mode. Even the most severely impacted markets such as New York City and Detroit continue to show improvement in their retail sales pace. Sales were down 71% and 75% in New York and Detroit, respectively, for the week ending April 26 compared to -75% and -84%, respectively, for the week ending April 19. Detroit, the capital of the American auto industry, ironically is the worst-performing of major U.S. markets.
- New-vehicle buyers are taking out larger loans for longer terms. That's largely the result of many automakers’ low-interest-rate incentive offers. The average loan amount for the month-to-date April 26 was $38,400, up $4,000 from pre-virus levels. Automakers’ captive financing units are dominating the lending market with a 75% share.
- Automaker incentives vary. The Detroit 3 (General Motors, Ford and Fiat Chrysler) along with Subaru, Hyundai, Kia, VW, Audi, Volvo and Jaguar Land Rover have continued to run 0% finance offers with extended terms of 72 months or longer. Nissan and Mazda recently launched 0% long-term finance offers on much of their portfolios. Less aggressively, Toyota is offering 0% for 60 months on only its RAV4 CUV. Honda is not offering 0% financing on any models. “There are a lot of ways to succeed,” Jominy says, referring to the various incentives.
- Delays in manufacturing restarts are creating inventory-level concerns. The sales recovery continues, but most production facilities remain closed. Current inventories are adequate to support near-term demand, but that might not be the case later.