While I personally think we’re weeks, if not months, away from knowing exactly how long the economy will take to fully rebound, consumers are coming back—and they’re submitting leads. In fact, U.S. leads* on CarGurus are almost at the same level they were at the start of February. Yes, February generally represents a smaller share of units sold than March and April, but the fact that consumer interest is trending up this early is a positive sign.
While total U.S. lead volume on CarGurus has nearly returned to the same level as February, lead volume varies by price bucket, and I’ll dig deeper into this below.
Low-priced vehicles slowest to recover
Historically, the impact of a recession is greatest for those with lower levels of education—and the COVID-19 recession is no exception. When diving into the numbers from the April Jobs Report, unemployment increased the most for those without, or only, a high school degree.
Generally, consumers with lower levels of education also have lower median weekly wages. This is important to note because weekly wages influence what a consumer shops for as banks typically limit the amount they’ll lend based on income. As a result, consumers with lower income tend to shop for inexpensive vehicles.
Because of the severe impact the recession has had on those who buy lower-priced vehicles, it’s no surprise that vehicles in this bucket are seeing a slower turnaround than vehicles in higher price ranges. Looking at U.S. lead submissions on CarGurus indexed to February 1, we see that the lowest two price buckets are still below February levels.
Uptick in shopper activity driven by vehicles in middle price bucket
The vehicles and lead submissions that fall into the $10,000-$30,000 price bucket are the core of the automotive industry. In the U.S., nearly 50% of the inventory and 45% of all leads from CarGurus.com as of May 14, 2020, fall into this price range.
On CarGurus, U.S. leads for this mid-tier price bucket are back to the same level as early February, and it’s these shoppers that are driving the uptick in shopper activity. As consumers feel less confident about the economy, they are decreasing their budgets for vehicles. According to our COVID-19 Sentiment Study, 39% are decreasing their budget. But it’s also driven by the fact that the core vehicle buying audience has not been as negatively impacted by the economic downturn as lower-wage workers shopping for lower-priced vehicles.
For dealers, competitive pricing and having the right inventory are key
While consumer confidence remains low, car shoppers are likely to remain cautious when buying a vehicle in the short term. They’ll be looking for vehicles in lower price ranges than what they’ve shopped for or purchased in the past. For dealers, this means two things:
- Price your vehicles competitively. Though it might seem obvious, now more than ever, consumers will be shopping for the best deal.
- Make sure you have the right inventory mix. As shoppers adjust their budgets, the vehicles you stock should reflect what shoppers are searching for.
As U.S. leads climb back up to February levels, it’s important to remember that February is typically one of the slowest months in the industry. While U.S. leads are starting to increase, each price tier is behaving differently. Some of the lower price tiers are. Most consumers still need time before returning to market.
*CarGurus defines leads as user inquiries via its marketplace to dealers by phone, email, or managed text and chat
Cautionary Language Concerning Forward-Looking Statements
All statements contained in this blog posting other than statements of historical facts, including, without limitation, statements regarding the impact of the COVID-19 pandemic on our business, consumer interest in our marketplace, and other statements regarding our plans, prospects and expectations, are forward-looking statements. These statements are subject to a number of risks and uncertainties, which could cause them to differ materially from actual results. Information concerning those risks is available in the “Risk Factors” section of our Quarterly Report on Form 10-Q, filed on May 7, 2020 with the U.S. Securities and Exchange Commission. We undertake no obligation to update forward-looking statements except as required by law.