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3 Stocks to Buy to Benefit from the Red-Hot Used Car Market

imageStock Markets22 minutes ago (Apr 27, 2021 02:30PM ET)

(C) Reuters. 3 Stocks to Buy to Benefit from the Red-Hot Used Car Market

While electric vehicle (EV) companies face difficulties in manufacturing new cars amid a global semiconductor chip shortage, and the need to travel while maintaining social distance remains, the demand for used cars has been increasing massively. Given this background, we think Group 1 Automotive (NYSE:GPI), CarGurus (NASDAQ:CARG), and America’s Car-Mart (CRMT) should witness solid sales growth in the coming quarters. So, these three stocks are good bets now. Let’s discuss.Amid a global microchip shortage, it is getting tougher for electric vehicle (EV) companies to manufacture new cars in sufficient numbers to meet growing market demand. The demand is particularly high because people still prefer to commute while maintaining the social distance compelled by the COVID-19 health crisis. This, along with an unwillingness (and perhaps inability) by consumers to spend large amounts of money on new vehicles with the global economy still weak from the effects of the pandemic, is driving increased demand for used cars. Also, several used-car companies are now integrating advanced technologies in their platforms, making it much easier for customers to buy used cars online.

The Manheim Index, which is recognized as the premier indicator of pricing trends in the used vehicle market, hit a 191.4 value in mid-April, which represents a 52.2% year-over-year increase. And, according to Mordor Intelligence, the used car market is expected to increase at a CAGR of more than 10% over the next five years.

So, it could be beneficial now for investors to bet on used car companies Group 1 Automotive, Inc. (GPI), CarGurus, Inc. (CARG), and America’s Car-Mart, Inc. (CRMT) to capitalize on the thriving used-car market.

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3 Stocks to Buy to Benefit from the Red-Hot Used Car Market

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