Automotive News Canada - September 2020 - 15

* S E P T E M B E R 2 020

NEW LIFE FROM

A transportation
alternative provides
dealers pandemic profit
By JOHN IRWIN

AUTOMOTIVE NEWS CANADA

USED CARS
DesRosiers Automotive Consultants.
About 1.14 million sales came from
private transactions, while about 1.1
million were generated by independent used-car dealers.

'DOING ALL RIGHT'

Warren Barnard, executive
director of the Used Car Dealers
Association of Ontario, said indeNEW-CAR DEALERS ARE
pendent used dealers have recovered
turning their attentions to used vehinicely from an "absolute disaster" in
cles to prop up business during the
April, during the height of
COVID-19 pandemic and
the pandemic. Those dealgain a bigger share of a
ers are seeing an increase
market that generated
in business thanks to formore than three million
mer public transit users
sales last year.
and other first-time buyShahin Alizadeh, CEO
ers entering the market,
of the Downtown Auto
he said.
Group in Toronto, said
"For the most part,
that about one-third of the
I think our members
group's used-vehicle busiare doing all right," said
ness is coming from panBarnard, whose group repdemic-wary customers
resents about 5,000 dealers
seeking an alternative to
in Ontario.
ride-hailing services, rent"I can't say they're doing
al cars and public transAlizadeh: Some
portation.
used-vehicle sales as well as last year, which
was a good year, but we're
"Most of our showare coming from
buyers seeking
plugging along and looking
rooms are on the [downalternatives
ahead cautiously optimistown] streetcar route,
to public
tic."
and you'll see four or five
transportation, and
Alizadeh said he does
streetcars go by with just
CPO programs are not see independent usedfour or five people in the
also helping.
car dealers as competition
car. It's just absurd."
because automakers' CPO
Offerings such as certi- F I L E P H O T O
programs attract customfied-pre-owned (CPO) proers willing to shell out more money
grams also are helping to boost sales,
for a used vehicle.
he said. But Canada's more than
"People are willing to pay the pre3,330 franchised dealers aren't grabmium to make sure they're buying a
bing the lion's share of used-vehicle
car that's been properly addressed as
sales, typically falling behind indefar as reconditioning. It's a different
pendents and private sellers.
world altogether."
Of the more than three milAt Edmonton-based AutoCanada
lion vehicles sold last year, dealInc., used-car sales are playing a key
ers accounted for 930,000 sales or 31
role in the company's turnaround
per cent of the market, according to

feared at the beginning of the panefforts. That strategy bore fruit in
demic.
the second quarter, when used-vehiAt the same time, U.S. buycle sales at its Canadian dealerships
ers seeking a discount from the
were roughly equivalent to new
exchange rate are continuing to purretail sales.
chase used vehicles from Canada,
AutoCanada operates 63 fransaid Brian Murphy, vice-president of
chised dealerships, including a group
research and analytics at Canadian
in Illinois.
Black Book. Between 5,000 and 6,000
Adjusting for an inventory writevehicles per week cross the border
down, AutoCanada's gross profit perinto the United States, Murphy said.
centage on used vehicles jumped to
"There's a lot of product flow17.2 per cent, compared with 16.8 per
ing south. I've heard from
cent in the same quarter a
some dealers that are comyear earlier. Gross profit
plaining that they get outon finance and insurance
bid at auction by people
for used vehicles also rose.
who can afford to spend
Used cars will likemore because they plan on
ly remain central to the
wholesaling the car in the
group moving forward,
U.S. as opposed to retailas AutoCanada plans to
ing it in Canada."
launch a digital sales platSome dealers are lookform.
ing to improve mar"We've been focused
gins on used vehicles
on the sale of used vehiwhile inventory is tight.
cles for some time as part
Steve Chipman, CEO
of the go-forward plan,"
Chipman: A Honda of the Winnipeg-based
AutoCanada Executive
trade-in will have
Birchwood Automotive
Chairman Paul Antony
Group, said a central-apsaid during an August call higher value at a
Honda store than
praising department uses
with analysts. "And our
it would at a BMW
data to better determine
progress there, which has
store.
FILE PHOTO
fair market value for
been echoed by the expetrade-ins.
rience of our U.S. peers,
"Through that, we suggest that
has provided incredible validation of
perhaps if you [the dealer] take in
both this end market and our ability
a Honda at our BMW store, you're
to execute."
going to do better with that car as a
HURTING FOR INVENTORY
group at the Honda store," Chipman
said. "We know that brand-on-brand
But as dealers look to woo usedsales are stronger. The [Honda] car
car buyers, they face an inventory
at our Nissan store or Toyota store
crunch.
or BMW store across the street, we
A shortage of new vehicles is
will maximize gross at the Honda
prompting customers who would typstore."
ically be in the market for a new car
Still, inventory remains a chalto delay a purchase or to purchase
lenge, he said.
their vehicle after a lease. That, in
"I'm more reticent to give up that
turn, has some dealers scrambling
vehicle than we were in the past
for inventory - although the tight
because of the shortage of cars,"
supply has prevented vehicle valChipman said. - ANC
ues from plummeting, as many had

A positive charge for used EVs
Residuals are on
the rise: Is it time
for dealers to dive
into the market?
By JOHN IRWIN

AUTOMOTIVE NEWS CANADA

USED ELECTRIC VEHICLES
are beginning to hold their
values better than in the past,
which could help bolster sales
and the case for dealers to
get into the used-EV space,
according to Canadian Black
Book (CBB).
"Higher values in the

[used] wholesale market help
to make the case for stronger
residual forecasts, which will
then in turn make new EV's
more attractive for leasing,"
Brian Murphy, vice-president
of research and analytics at
CBB, said in an email.
"I do think dealers should
consider the EV market.
There certainly are sales to
be made there."
EVs in the past had a
"really weak track record" on
residual values, a factor that
scared away many consumers, whether leasing or buying. But that is beginning to
change, said Murphy.

The Nissan Leaf is an
example of an EV with slowing depreciation. According
to CBB, a 2019 Leaf in good
condition would wholesale
for $30,450 in August 2020 -
its 16th month in the market - or 68 per cent of its list
price.
That's significantly better
than a 2016 Leaf that, after 16
months, wholesaled for about
$17,650, which is 41 per cent
of its list price.
"At one point, of the five
vehicles that were the weakest performers of retaining
values in their marketplace,
three were EVs. What we've

seen more recently is they're
starting to perform more like
their internal-combustion siblings," Murphy said.
"They're not quite there
yet because there's still people who have questions about
everything under the sun,
from longevity of the battery
to range. Eventually, it will
normalize."

BUY EV, STAY EV
Even though EVs, new and
used, remain a tiny portion
of the overall market, Plug'n
Drive CEO Cara Clairman
said she hopes that consumers will view the growing

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Clairman: Once buyers get
into EVs, they seldom go
back to internal combustion.
The low prices of used EVs
makes them an affordable
option. F I L E P H O T O

supply of used electric vehicles as an affordable option.
And once they buy a used EV,
she said, they could be in the
market for a new one down
the line.

Al
Do
Gr
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Automotive News Canada - September 2020

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