Deals are another reason for the inventory drop. Car dealers are desperate to move their inventory, and they’re dangling enticing terms to do it.  Prices have fallen as much as 16% below JD Power’s pre-pandemic forecasts, according to the bank RBC. Detroit automakers are extending interest-free car loans for as long as seven years, far longer than normal. The share of deals including zero-percent financing shot up to 21% of all new sales last month compared to the usual 2%.

The second reason is the inequality of Covid-19 itself. The virus has struck minorities and low-wage workers hardest. In April, job losses were “disproportionately concentrated” among low-wage workers, according to the US Bureau of Labor Statistics. Those earning $32 per hour or more experienced job losses of just 9% compared to those earning $15 per hour who saw a 35% drop. Those job losses affect the lower end of the vehicle market as well.

Cox Automotive predicts the high end of the car market will weather the storm far better than the vehicles—and customers—at the bottom of the economic recovery. “Trucks, vans, and heart-of-the-market SUVs will do best as U.S. auto sales recover,” it states. “Subcompact and compact cars, along with subcompact SUVs, will struggle the most since typically they are purchased by the least credit-worthy consumers.”

This item has been updated to clarify the trend is shrinking inventory, not an increase in sales.

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