One somewhat unexpected aspect of the COVID-19 pandemic has been its sudden, seemingly permanent impact on how Americans view working remotely and commuting. With the massive spike in professionals spending some or all of their workdays at home, many families are downsizing or rightsizing their vehicles as one of many monthly expenses.
With all of this happening simultaneously, it shouldn’t come as a shock to hear that used car sales in New Mexico are way up — as are the necessary title transfers that come with them.
Car Sales = Car Title Transfers
If you’ve recently been involved with a used car sale, ensure you understand how to transfer a vehicle title in New Mexico to avoid potential liability issues. For immediate assistance, call or visit MVD Express today!
As New Mexico’s original and largest private option for MVD title transfer services, our team has witnessed the impact coronavirus has had on the used car market firsthand. Since the state of New Mexico does not grant ownership of a vehicle with a signed-over title until the DMV title transfer form and fees are accounted for, MVD Express is the first stop for many local residents after acquiring a new vehicle.
And we can tell you: used car sales are definitely up statewide.
Why the Increase in Used Car Sales?
What’s interesting about the used car market is that it often works in unique and unpredictable ways.
For instance, one might expect used car prices and sales to go down amidst some of the lowest driving conditions in the modern age, however, the opposite has proven to be true.
In a recent press release, experts at vehicle researching site, Edmunds.com stated that we’re seeing as a result of the coronavirus is “…an unprecedented historical shift in the used vehicle market, where listing prices typically decrease during this time period due to depreciation.”
But that begs the question: why are used vehicle prices up, and not down, right now?
There are a number of interesting factors to consider here, but the largest drivers of the increase in used car sales are:
1 – Many families are looking to downsize
With telecommuting at its highest levels ever, some drivers are finding they can get by with less expensive vehicles. Likewise, with record-high unemployment rates looming, some families just can’t afford their current vehicle’s monthly payments and need to move into a more affordable vehicle.
2 – Essential workers still need to commute
Not all families are able to work from home some or all of the time. With essential workers still on the frontlines of the pandemic, there are still plenty of vehicles necessary to satisfy our commuters. Again, with high unemployment rates on everyone’s mind, affordable options are in high demand.
3 – Public transportation could pose risks
Since the coronavirus is largely spread through close contact with others, public transportation is either not available or not desirable for many folks that once relied upon it. This alone would be enough to strain the used car market as these new drivers look for affordable, likely temporary, options.
4 – Record-low interest rates favor buyers
Home prices have also surged unexpectedly during the coronavirus, largely driven by record-low interest rates available to borrowers. This is certainly not lost on the used vehicle market, as affordable monthly payments are available to nearly any buyer for most vehicles.
5 – New cars are still a high-ticket item
All of these factors have encouraged vehicle manufacturers and dealers to offer some impressive incentives on their inventory of new vehicles, but it’s still not enough to drive down prices. When you consider that many factories were shut down in the spring, there isn’t as much of a glut of new cars as you’d expect. Also, drivers are cautious to move into the upper end of their spending power for fear of future job loss. So, many new cars are going unsold, even with incentives.
6 – Leased vehicles flooded the used car market in early summer
For the first time ever, widespread car dealership closures in March and April forced those leasing a vehicle to hold onto it for longer than expected. This created a bottleneck effect, as early summer saw a flood of returned vehicles that are fresh out of a lease. Coupled with a reduced desire for lessees to purchase their vehicles, this impact was further expanded. And, since leased vehicles are often newer than the average used car, these options don’t look appealing next to new vehicles with dealer incentives. Basically, they take up space on the lot.
The Compounding Impact of Increasing Demand
All of the factors above account for the “demand” aspect of the used car market increasing this year. However, since the “supply” of used cars comes from the same pool of consumers that drive the demand for them, there is little incentive for drivers to give up a desirable vehicle — even at a higher-than-usual price.
For instance, here are how those same 6 factors we identified driving demand above also influence a lack of supply for used vehicles:
- Families with an older vehicle that they may have otherwise upgraded this year no longer feel the need to, which means there is one less used vehicle available for drivers looking to downsize.
- Essential workers with a working car, especially those with low or no payments, see no reason to buy a better used vehicle, as prices and inventory for them are not favorable.
- The risk to public transportation has incentivized vehicle owners to fix up or utilize any vehicle they already have, even if they’d prefer public transportation or a newer model under typical conditions.
- Record-low interest rates also apply to refinancing current vehicles and other debts, which helps those with a high monthly payment keep their vehicles instead of trading in or up.
- New cars are seen by many as a risk not worth taking. Since prices haven’t fallen dramatically, there are fewer trade-ins in 2020, which means less used inventory for dealerships to work with.
- At the end of a vehicle lease, a certain percentage of lessees will typically choose to “buy out” their vehicle and keep it permanently rather than returning it. For many, these vehicles’ price points do not look favorable at the end of the agreement based on current market conditions. While this does add to the supply of dealer-owned used inventory, these vehicles are not appealing for other buyers either next to competitively-priced new models or older, more affordable used vehicles.
Essentially, the same factors that are pushing up the demand for used cars are also pushing down the available supply of them in the market. Unlike with other products, we can not simply increase the supply to match demand when the same audience controls both aspects.
This means that, until something changes, used car sales and prices will continue to climb ahead of available supply.
Complete Your Title Transfer Today
Another predictable effect is an increase in direct private sales from owner to buyer. Since there are fewer trade-ins for new vehicles, we anticipate a continued increase in private vehicle sales across the state. Since there is no dealer involved with these transactions, it is up to both parties to ensure that the vehicle’s title transfer and fees are properly handled at a New Mexico MVD.
If you’ve been involved in a vehicle sale, get your title transfer taken care of at MVD Express. Schedule your appointment at one of our 10 convenient New Mexico locations today!