Car sales are booming

‘This doesn’t make any sense’: Sellers unsure what’s driving buyers

Had it not been for the COVID-19 pandemic, Heather Green and her husband wouldn’t have taken the plunge to buy a 2016 Mini Cooper in the spring.

A car just hadn’t been that important to them, and, in fact, when the pair relocated to Philadelphia from Texas years ago, getting rid of their car was a top priority. Walking, SEPTA and the occasional rideshare got them around just fine.

“Never thought that we would be in a situation where

we would need or want another car,” said Green, 46, who lives in Center City.

But a situation did arise in March, of course, and has stretched onward. Rideshares became difficult to hail, Green said, and sitting next to a stranger in a car or on SEPTA just didn’t feel comfortable amid a virus primarily spread person-toperson. Transporting their 90-pound dog also factored into the decision.

For those who can afford it, swapping public transportation for a private car amid the pandemic could be feeding the rebound of the region’s retail car sales after dealerships temporarily shuttered and stay-athome orders kept many off the roads amid an economic crisis expected to keep purse strings tight.

Maybe it’s just pent-up demand or appealing incentives, according to experts. Other possible reasons include the convenience of online car shopping and stimulus checks, on top of savings from staying home from bars and restaurants. Regardless, dealerships are eager to welcome buyers back to showrooms.

“Certainly we’re down,” said Kevin Mazzucola, executive director of the Auto Dealers Association of Greater Philadelphia. “But it’s all in context. If you talk to dealers, or even consumers, everybody’s surprised of the fact that sales are as strong as they are in context of what’s going on.”

The Pennsylvania Department of Transportation saw a big jump in new registrations over the summer, bouncing back from the spring’s bottomed-out figures when automotive dealerships were ordered to halt sales for about a month. There were fewer than 18,000 new registrations in April, compared with 161,000 in the same month last year.

By July, registrations had spiked to about 215,000, compared with 158,000 in July 2019. However, total registrations are down to about 1.1 million between January and August compared with 1.2 million during the same period last year. The figures don’t account for those who traded in a car and transferred their existing license plate, according to PennDOT.

The same is true for Philadelphia and its collar counties, Mazzucola said. Sales overall are down, but the industry has seen gains over recent months.

“That doesn’t seem to make sense, does it?” he said. “If people are losing their jobs and there’s tentativeness and unknowns, yet people are buying vehicles at a decent clip.”

Dependency on cars has significantly changed, he said. It’s become almost integral in the countless ways the region has adapted to life. COVID-19 tests are done through drivethrus and movies are watched through windshields. Birthdays and graduations are celebrated with beeps and window paint.

Austin Galiardi, 30, of Philadelphia’s Bella Vista neighborhood, had already decided to get a car, but the pandemic accelerated the inevitable as Amtrak suspended service and other modes of transportation felt unsafe to him, even as SEPTA has enhanced cleaning efforts and required passengers to wear masks as some of its COVID-19 mitigation measures.

Working from home can get lonely, and he’s looking forward to using the 2017 Ford Focus hatchback to see family who live about two hours away and leaf-peep on idyllic Pennsylvania hikes.

“Philly just makes it easy to have a car,” he said. “I think that’s a big draw.”

Patrick Olshin, general manager of CarMax in King of Prussia, said, “The market is booming.” The company, which calls itself the nation’s largest retailer of used cars with more than 200 stores, points to a demand for older and less expensive vehicles as a contributor to its “record results” during its second fiscal quarter, which ended in August.

“It just seems like everyone you talk to is looking to buy a car,” he said. “I don’t really know what the reason is for that, other than people just need a vehicle. They need a safe way to get to work, and they’re taking advantage of that.”

In the spring, Beth Beans Gilbert, vice president of Fred Beans Automotive Group, was “terrified” as much of the company’s inventory sat idle. As the months passed, the group finetuned its online sales features and internet traffic began to climb.

By July and August, Fred Beans was “running really lean on cars,” she said, and in September saw the same amount of monthly sales as last year.

“My husband and I, every night, are like, this doesn’t make any sense,” she said. “It’s kind of scary because you don’t know what’s going to happen next.”

Philadelphia has seen an 18% drop in year-over-year used-car registrations and a 24% fall for new-car registrations, according to data from IHS Markit/Cox Automotive Estimates. That’s roughly in line with national figures.

New cars priced under $30,000 aren’t selling as well, said Michelle Krebs, executive analyst at Cox Automotive, whose brands include Kelley Blue Book, Xtime, Autotrader. com, and Manheim, indicating that those who may be more budget-constrained are turning to the used-car market.

“These are all down numbers, and it’s going to be, because we had two months where nobody did anything,” Krebs said. “But what we have been seeing is that it is picking up, and used is picking up faster than new.”

She remains cautious about the months ahead, highlighting signs of slowed momentum in August and taking unemployment, credit tightening, and uncertainty around an additional stimulus check into consideration. She doesn’t expect the industry to be back to pre-COVID levels for at least a few years.

Gary Barbera of the Gary Barbera Group contends that the used-car market is still “red hot,” making now a good time to buy. Over the summer, there was “an unprecedented historical shift” in used-car sales, with average listing prices reaching about $21,500 in July, up about $700 from the month prior, according to Edmunds, the car-shopping research website. New cars are making a comeback, too, according to its forecasts.

Jessica Caldwell, Edmunds’ executive director of insights, called the recent strong retail sales “quite encouraging.”

“It feels like both car and home sales have been very surprising through this whole pandemic,” Caldwell said. “That they have stayed relatively strong given the fact that they are such big purchases.”

Barbera doesn’t have a clear answer as to why, but it might all “come back to the need.”

“I need to get here,” he said. “I need to get there. I need to keep my family safe. It all boils down. You can’t do that staying in a hotel. You can’t do that taking Uber, taking the train. But you can do that in your own car.”