Bargain-hungry buyers to help Carsales ride out the recession

Carsales's boss Cameron McIntyre says the online vehicle classifieds group can ride out a recession, with used cars still a big drawcard for consumers looking for bargains in tough economic times.

"For me the reason why is because we live in a large country, there are substantial distances for you to travel from home to work and you need a car. But in tough times you may decide you'll take $20,000 of equity out of your car," he told The Age and the Herald.

Online classifieds group Carsales says there are signs of an improvement in vehicle sales.Credit: Joe Armao

"When that happens we still benefit from the trade because there's a flow, so whenever there's a buy and a sell it benefits us," he said.

Meanwhile, the easing of COVID-19 restrictions has seen traffic pick up at Carsales's platform, with advertised vehicles selling at a quicker pace. According to Carsales, the uptick was on the back of more first-time buyers entering the market and households looking to pick up an extra vehicle to avoid public transport.

Mr McIntyre said a range of other factors, including fuel price movements, could spur further buying activity.

"You've probably at the moment got people taking money out of superannuation and receiving JobKeeper and so on and putting that towards a car," he said.

“When fuel prices go up, what happens is we see a trade-off between SUVs and small hatches.”

The comments came as Carsales's latest trading update was warmly welcomed by the market, with the company's shares climbing over 6 per cent to end the session at $18.00.

Carsales forecast a decline in reported net profit of between 6 to 9 per cent, between $120 million to $124 million, for fiscal 2020, after it gave heavy discounts on advertising to customers.

However, on an underlying basis, including about $26 million of advertising not charged, Carsales expects to book a profit of between $134 million and $138 million for the year.

In April Carsales said about 250 of its Australian staff would be stood down temporarily, and that board and executive pay would be reduced by 20 per cent for the June quarter because of the coronavirus.

The pandemic has smashed new car sales , with April sales down a record 48.5 per cent as the virus rattled consumer confidence and people stayed indoors.

However, Federal Chamber of Automotive Industries CEO Tony Weber said things were starting to pick up, with more potential buyers visiting car showrooms in June.

"June is typically a very strong month and the evidence we have is that the foot traffic coming into June and early June was a lot stronger than what we saw in May," he said.