Memorial Day weekend sales forecasted to be hot with a bubble on trade-in prices

In most years, Memorial Day weekend kicks off the busiest selling season for car dealers, barring a worldwide pandemic of course. As Americans are returning to a relatively normal existence with many restrictions lifting and consumer confidence growing, this Memorial Day weekend is expected to wrap up May in style.

Strong sentiment in shoppers has driven car sales to record levels in recent weeks at dealerships nationwide, and reduced production capacity at auto manufacturing plants around the world has led to a shortage. The resultant swing of control to dealers in supply and demand has been amazing at keeping more profit in each deal, especially as buyers are not yet balking at paying full retail. For active car shoppers, Cars.com reports that 43% intend to conclude their search with a purchase this long weekend.

Assistant managing editor at Cars.com, Kelsie Mays, says, “Memorial Day weekend is traditionally a very active car-shopping holiday with significant discounts offered across the industry, but the global chip shortage and huge consumer demand continues to impact both new and used dealer inventory. A few attractive deals still exist this holiday … but now is a prime time for consumers with a little-used extra vehicle sitting in their garage to cash in, as most dealers are relying on trade-ins to maintain their stock.”

Expect to pay up for trades

Dealerships should prepare to be busy with sales, but car owners are also going to be looking for opportunities to trade in their current vehicle at burgeoning prices. Since January, used car pricing has increased by 14% on massive demand and dealers are eager to take high-quality vehicles on trade to replenish dwindling stock. Although they may be paying more for the vehicle they aim to purchase, consumers may be able to get out of a trade with what they view as an aggressive offer from the dealer.

Mays said, “Buyers with a car to trade in may find some relief from its inflated residual value, which can help take the sting out of a higher-priced replacement vehicle.That’s especially true if the trade-in is less than 4 years old, a group with the highest dealer-reported shortages.”

Good time to focus on in-stock units

The report from Cars.com indicates that new cars are the primary focus for Memorial Day weekend car shoppers with 61% planning to purchase a new car and 24% settled on pre-owned. But as a somewhat surprising shift form the norm, purchasing intentions shifted among segments.

SUVs continue to be the most in-demand segment with 37% of shoppers this weekend looking for one. However, 30% are looking to purchase a sedan and just 11% are in the market for a pickup truck. The shift could be the opportunity dealers need to alleviate some pressure on the models that factories are struggling to produce and instead sell some of the less popular vehicles – sedans in particular – that are relatively abundant.

With incentives slim and demand through the roof, Memorial Day sales present yet another potential record-setting day to round out an expected high-performing month.

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