Market Outlook: What should auto dealers watch out for this Spring?

On this edition of Inside Automotive, we’re pleased to welcome back John Ellis, Inventory Strategist for Cox Automotive. As a Strategist for Cox Automotive, John has the ability to see the market from many angles and has used that lens to supply guidance to clients during the last 22 months of the pandemic. Today, he discusses current market conditions, the upcoming tax season, and the outlook for 2022.

Right now, Ellis says market conditions are mirroring 2021 and there are some behaviors that auto dealers cannot repeat this year. For example, let’s look at market day supply. The day-supply of inventory on auto dealers’ lots right now is very high, explains Ellis. He is predicting a sales bounce-back in Spring due to a tremendous tax season. So, auto dealers can take advantage of the soft market today and flip some of their older, high-mileage inventory to prepare for the upcoming season.

There are some indicators that the retail demand will pick up soon. The overall U.S. economy is robust. Unemployment rates are below 4%, wages are up, and disposable income is up, which suggests pent-up demand is waiting to unleash. 

When it does unleash, how likely are consumers going to continue tolerating these high retail prices? Cox Automotive data reveals that, compared to 2019, consumers with good, valuable trades, are getting the best deals right now in 2022. There is better equity for the consumer even with higher dealer profits. The key is transparency through the entire car-buying process. 

The pent-up demand in the automotive space, combined with the availability of credit in the market, and strong savings accounts, means that consumers have the funds the purchase vehicles. Although, many of them are waiting to see how much their tax refund will be, before making a purchase. Refunds may be a little lighter overall, but the market is still very favorable and bursting with money.

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