Smart Borrower Blog

Coronavirus Tanks Auto Sales


Apr 9th, 2020 @ 10:33 AM by Amber Nelson


Total U.S. car sales in March hit their lowest level in nearly a decade, according to Standard & Poor’s, another financial victim of the coronavirus shutdowns across the country.

Sales fell 32% from February as many dealership showrooms were temporarily closed and most states were put on stay-at-home orders. The last week of March showed the steepest decline of the month with only 126,000 cars sold, which was 61% lower than predicted by J.D. Power before the outbreak of COVID-19.

If China’s auto sales are any indication, April could be even worse. In February, when China was experiencing the worst of the virus, total sales fell to less than 500,000, down from over 2.5 million in January, according to data from the Center for Automotive Research.

Average car prices are expected to decrease during this crisis as demand continues to freefall. JPMorgan has forecasted a 15% plunge in used-car prices, a larger drop than during the Great Recession.  And Moody’s Analytics similarly predicts them to fall between 5% and 8% over the next quarters. During the last recession, Americans often prioritized paying car loans over mortgages, but today with many people unable to leave the home, that order is getting flipped.

prices, a larger drop than during the Great Recession.  And Moody’s Analytics similarly predicts them to fall between 5% and 8% over the next quarters. During the last recession, Americans often prioritized paying car loans over mortgages, but today with many people unable to leave the home, that order is getting flipped.

In addition to declining car sales and prices, there is trouble in the auto loan market as well. An April 3-5 survey by J.D. Power found that 12% of U.S. consumers have already been unable to make the minimum car payment since the coronavirus emergency began.

Lenders have been offering forbearance programs to many borrowers, which allows them to defer payments for several months. Many of these lenders are still required to make payments to secondary market bond holders though, a situation could threaten the health of auto loan-backed securities. And if more borrowers start defaulting on their loans, those securities could suffer even larger setbacks.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

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