It has been a busy week since Canadian Black Book’s latest COVID-19 Auto Industry Update was released, and there have been a lot of downs since last week. But there has also been some noteworthy improvement.
On the down side retail new car sales for June 2020 are likely to be down year-over-year. And the steep decline for retail trade sales by province/territories for used cars in March and April have been described by CBB as “unprecedented for the Canadian auto industry.”
But the decline of used car values is quickly slowing in many segments. Of the nine car segments, five increased in value, one remained flat, and three declined. Car values for 2-8 year-old vehicles increased on average by 0.19 per cent last week. CBB said they have not seen an increase in values for cars since the week of may 23.
“For the month of June, the average weekly adjustment in car values is still negative at -0.29 per cent, however the improvement over the last few days of June is certainly noteworthy,” said CBB.
On truck/SUV/Crossover segments, these fell last week by 0.05 per cent — which is small when compared to the previous week’s average decline of 0.52 per cent per week.
Of the thirteen truck segments that CBB tracks, seven increased and six were down in value. Mid-size crossovers were among the segments that experienced a loss — of 0.03 per cent, which is not a significant dip in value when compared to last week.
“Value adjustments for trucks for June 2020, as of last week, equal -0.47 per cent and for cars -0.29 per cent,” said CBB. “Given the general negative direction, we expect the Canadian Black Book Value Index for 2-6-year-old vehicles will decline for June, however at a much milder pace than the previous months.”
CBB said it believes wholesale prices will continue to soften until it reaches a total decline of 17 per cent, industry-wide. This would be from the normal values typically anticipated without the pandemic as a factor.
“At the present time, with the market seeing very little trade-in action or lease return activity for over two months, there is a scarcity of product in the marketplace,” said CBB, which also said it views the issue of low inventory as temporary. The expectation is that there will be a surge in supply in the coming months that could push prices down.
On the recession, CBB said one of the side effects stemming from the pandemic is the expectation that there will be an increase in repossessions for vehicles that were sold as new and used. Equifax Canada, it said, is anticipating a 25 per cent increase in credit delinquencies over the next six months — and not just for automotive loans.
Consumers however, will likely focus on a payment hierarchy that includes the cell phone as a top priority, along with the mortgage payment. After that comes the car/instalment loan, and lower down the list, lines of credit and credit cards.
CBB also said there has not been a lot of collection and repossession activity amid COVID-19, but once repossession activity starts up again — and in a big way — there will be more units heading to auction across Canada.