Industry experts are predicting that dealer activity in the new year will be easily sustained courtesy of above-normal consumer demand for vehicles. The effects of inventory shortages have developed a backlog of consumers looking for vehicles, both new and used. Entering the new year, the industry should expect a similar sales climate with prices that will continue to reach new records.
Edmunds’ experts are forecasting that 15.2 million new vehicles will be sold in 2022, according to a press release on Thursday. That estimate exceeds the total sales volume in the US for 2020 by a half-million units and is likely to surpass 2021 total sales by around to million vehicles. Targeting just over 15 million units falls well short of normal sales which have surpassed 17 million annually from 2015 through 2019 – before the effects of the pandemic were felt in the auto industry.
Jessica Caldwell, Edmunds’ executive director of insights, said, “2021 marked an unusual year of highs and lows for the industry: Every automaker across the board struggled at the mercy of their suppliers and logistics amid chip and inventory shortages while simultaneously enjoying skyrocketing consumer demand and minimized spending on incentives.
“Sales have been depressed since the spring, but consumer appetite for new vehicles continues to run high, which will only serve to build up deferred demand next year and beyond. In 2022 there won’t be a question of how many new vehicles consumers will buy, but how many vehicles automakers can actually produce.”
Expected new car trends for 2022
It will still be many months before normal manufacturing volume returns. In the meantime, consumers who need a new vehicle will be at the mercy of both carmakers and dealers who are commanding higher prices than pre-pandemic. November 2021’s average transaction price nearly reached $46,000, and it certainly isn’t out of the question for it to top $50,000 for the first time in the coming months, reflecting a combination of higher sticker prices and dealers selling over MSRP, plus feature-rich vehicles that are more prevalent.
Edmunds also expects that leasing will fall out of favor with carmakers. Between strong sales and more high-end vehicles that depreciate faster, reasons to incentivize leasing have vaporized. Leases made up just 23% of transactions in November 2021, down from 29% in November 2020.
Of the headlines through 2021, EV development was consistently at the top of the page. Sales for EV models are predicted to make significant strides in the next calendar year as more all-electric models move from concept to production. Edmunds forecasts more than 600,000 EV unit sales in 2022 with the Ford F-150 Lightning capturing a major portion of those sales when it arrives. Of course, Tesla is still expected to lead the way, albeit with a shrinking market share.
Used car prices inch upwards
Naturally, as the price of new cars continues to climb and availability constraints linger, auto retail pressure transfers over to the used market. Wholesale and retail prices will escalate higher than ever, and Edmunds forecasts that the average retail price will reach and exceed $30,000 in 2022.
Pressure will be sustained in the used market for a while since off-lease units are declining, plus most of the car rental companies don’t have the volume of off-rental units to wholesale that they previously did. Current wholesale and retail used car inventories are back to normal, but there’s no guarantee they’ll stay there.
|Related: What’s the reason behind fluctuating wholesale values?|
For consumers with a trade-in, high used car prices can be a silver lining. As they see prices going ever higher, they can be mildly comforted that their trade-in’s price is increasing at a similar rate. Edmunds’ senior manager of insights, Ivan Drury, said, “For all consumers who currently own a vehicle (and for many customers who currently lease a vehicle), they can expect to capitalize on the value of their trade-in since there’s no indication that used values will fall off a cliff anytime soon.”
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