CARY, N.C. -

There is likely to be 36.1 million used-vehicle sales this year, according to the latest forecast from Cox Automotive.

But that projection, and the company’s forecast for new-car sales, could hinge on whether another federal stimulus package arrives.

To better illustrate that dynamic during Wednesday’s quarterly Manheim Used Vehicle Value index call, Cox Automotive's Jonathan Smoke turned to the music of the late great Eddie Van Halen and his rock-star bandmates.

“If we fail to see any stimulus before year-end, the odds grow for a double-dip recession and higher unemployment to end the year,” Smoke began. “If that’s the case, credit will become more challenging and sales could be lower than we’re forecasting. If we have a bigger stimulus package, the used market could particularly be stronger, and of course, much continues to depend on the virus itself and the timing of vaccines. 

“So, let me frame the importance of a stimulus package for the used-car market by also paying tribute to the rock legend who passed away (Tuesday) after a long battle with cancer, Eddie Van Halen,” he said. “The difference that new stimulus would mean for the used-car market is the difference between two tracks on one of my favorite rock albums of all time: ‘1984.’

“The song will be ‘Jump’ when we do get a big stimulus package,” Smoke said. “But it’s ‘House of Pain,’ while we wait.”

Speaking of ‘Jump,’ there usually is a spring “bounce” in the used-car market, spurred by tax refund season.

So, during the Q&A portion of the call, Smoke was asked what another round of stimulus would do to such a spring bounce.  He confirmed that it would have an impact.

“That’s why all signs kind of point to, if we don’t have a stimulus of substance between now and the end of the year, or before the election, then it’s likely not going to come until the newly elected people are inaugurated at the beginning of January, in particular the new Congress, which is likely to be more Democratic,” Smoke said, “and therefore the stimulus is likely to be closer to what they have been sketching and trying to do all summer long. 

“So, if you combine that then with tax season, I couldn’t think of a better environment for strong used-vehicle sales. To give you some perspective, we always see a spring bounce driven by tax refunds. It varies in its intensity, depending on changes that are happening in taxes and changes that are happening in tax refunds,” he said. “But in general, there is no doubt that when cash is in people’s pockets, there is an increase in used-vehicle purchases.”

Smoke breaks it down further. There was $2.2 trillion in the previous CARES Act stimulus, he said, $1.6 trillion of which ended up in consumer savings accounts from the end of February to mid-July.

That figure alone is “nearly five times what tax refunds have been for the last couple of years,” Smoke said.  

“If cash in pocket means something and we have tax (refunds) plus something close to that amount, if not potentially more, then I think demand could absolutely be stimulated when that money starts to matriculate through the economy,” he said.

Smoke later added that a potential kicker in tax season via a Democrat stimulus package is possibly a “forgiveness for people not withholding properly, for receiving unemployment benefits, which is going to have a disproportionate impact on tax refunds for those who are more likely to buy used vehicles to have even more cash.”

As a result, the market would have a “confluence of trends” likely pushing more money into the used-car market, he said.

Currently, Cox Automotive is forecasting 39.3 million used-car sales for 2021, which would be a nice bump from the 36.1 million it is projecting this year.

In 2019, there were 40.0 million used-car sales.

As for what Cox considers “retail” used-vehicle sales (or those from dealers only), it is projecting 19.1 million sales this year, down from 20.8 million in 2019. For 2021, Cox is projecting 21.2 million.

Looking at more recent results, it is estimated that there was a 5% year-over-year dip in total used-vehicle sales in September, according to Cox Automotive.

The total used-car SAAR for the month was estimated at 38.0 million, steady with August figures, the company said. In September 2019, the used SAAR was 39.8 million

As for the retail used SAAR, it was an estimated 20.2 million in September. That compares to 20.7 million in September 2019 and 20.3 million in August.