The automobile industry has ever been so enthralling and alluring. It attracts consumers every day as its habitués are in constant need of upgrading their gadgets and maintaining their motorcars with the latest tech and systems. These industries manufacture products that are not only cognizant to many people but are necessitous to them as well. Moreover, a tint of allurement with the latest and fascinating designs never hurt anybody. My family and I have been a devotee of the latest cars and automobiles in general. Although the price of cars is quite high in the U.S., considering the insurance, loans, and its taxes’ payment since me and my family had a deep love for cars, we were able to buy and maintain our cars according to the latest trends. But this situation was before the pandemic.
By the end of the year 2019, a novel Coronavirus (Covid-19 ) has spread across the whole world (Shereen et al.). This has convulsed consumer beliefs, created havoc in the stock exchange market and led to the unemployment rate in the U.S. spiking to its highest, which is 14.7%, hence making more than 30 million people unemployed (Furman et al.). In such a Sturm und Drang situation, we cannot even think of buying a new car, let alone upgrading it. As a result of social distancing and lockdown imposed in the country, we are restricted in our homes. Similarly, the automobile shops are also closed under the lockdown, so even if we think of buying or repairing our car, we cannot do it as our health is at stake.
In the month of May, the price of used cars spiked at unprecedented rates, rising to 17% as compared to its expectations before the pandemic started. This was mainly because new cars were not being made as the automobile showrooms and manufacturing firms were closed due to the pandemic. This redirected consumers’ buying paradigm to the used-car lot. As consumer demand increased, thus leading to the increased price rate of used cars. Moreover, as oil prices have decreased to an astonishing level since the disruption of the supply-demand in the country, this has led to the consumer’s shift towards the use of heavy trucks and sports vehicles.
Although new cars, on the other hand, have seen an increased price rate of 3%, from March 2019 to March 2020, but there has been a drop rate by 0.1% in April 2020 (Average New-Vehicle Prices Up Nearly 3% Year-Over-Year in March 2020 – Dealer Ops – Auto Dealer Today). The decrease in consumer demand for the new vehicles has led the dealers to offer automobiles with an interest rate of as low as 0% and increase the loan lengths from six to seven years. Hence, in the short run the price of automobiles is inelastic in nature as people being cautious of their financial status do not prefer buying new cars no matter how much low the oil, interest rates and taxes have gone. While in the long run, if the prices remain as low as they are now (which would hardly be the case), automobiles would become a price-elastic commodity.
Albeit the prices, loan lengths and interest rates for new cars have dropped, for the time being, me and my family I won’t be buying them anytime soon. The main reasons are the security of the fiscal status, the scepticism towards hygiene when going out in automobile showrooms and the situation of the country under lockdown. Although dealers have started the virtual sales of automobiles (Davis and Engelhorn) but the self-satisfaction of test driving and cross-checking every nook and corner of the car ourselves would restrict us from using this facility anytime soon.