Car availability is expected to improve in the second half of 2022

NATIONWIDE — Higher prices than ever. Limited availability. Constant demand. If you’ve been looking for a vehicle in the past year, you know it’s tough to buy right now. But there is good news for 2022.

“We expect the supply situation to improve significantly over the course of the year,” Cox Automotive senior analyst Charlie Chesbrough said during an industry insights webcast. 2022 this week. “The first quarter is likely to be challenging with omicron entering the world, but the second quarter and particularly through the second half of the year, supply should see a noticeable improvement.”

What do you want to know

  • Cox Automotive expects new vehicle sales to grow 7% in 2022 as automakers recover from pandemic-induced supply chain issues and increased manufacturing
  • Used car sales expected to decline this year
  • New and used car prices should continue to outpace average inflation
  • Cox analysts say demand will remain high in the first half of the year but will subside in the summer

Cox forecasts a 5-7% increase in new vehicle sales throughout the year as automakers recover from pandemic-induced supply chain shortages that have hampered production and emptied batches dealers. Its analysts also expect a 4% drop in used vehicle sales.

Prices, however, are expected to remain high and in many cases outpace inflation as they did last year. In December, the average price for a new vehicle transaction hit a new high of $47,077, a 23% increase from a year earlier, according to Kelley Blue Book. In November, the list price for used vehicles also hit an all-time high of $27,569, a 27% increase from 2020.

“Rising prices haven’t dampened the vehicle market yet, but as interest rates rise this year, monthly payments will follow,” Chesbrough said.

With the Federal Reserve set to raise interest rates three times this year, as early as March, Cox Automotive expects even greater demand for new and used vehicles in the near term as consumers worry about rising prices. rate.

“These increases change the market and also probably change who can afford to buy a new vehicle, he said.

Already, the used-vehicle market has reached all-time highs in price due to a lack of new vehicles driving more buyers to purchase used vehicles. Higher prices for new cars, trucks and SUVs are also a factor.

Ten years ago, 54% of new vehicles were priced below $30,000 and 6% were priced above $50,000. Today, the situation has reversed. Only 19% are priced below $30,000 and 30% cost more than $50,000 as automakers move away from lower-priced vehicles, forcing more buyers into the used market.

Last year’s tight supply allowed sellers to charge significantly more than the manufacturer’s suggested retail price, and consumers were willing to pay for the markup.

Even with 2 million fewer vehicle sales in 2021 compared to pre-pandemic levels, automakers’ revenues were $70 billion higher than in 2019, while used vehicle sales l last year were the highest in a decade.

American brands in particular are becoming less affordable, Cox found. Ford has now overtaken Mercedes as the market leader in vehicles costing more than $50,000, according to Cox data. Asian manufacturers are currently the leaders in the affordable car market.

In 2021, Japanese automaker Toyota sold General Motors in the United States for the first time, with sales up 10% from 2020. The Camry was the best-selling car last year, while the RAV4 was the best-selling SUV. .

Hyundai also increased its market share by 1.5%, finishing ahead of Honda to become the fifth best-selling auto brand in the United States, while Ford, GM and Stellantis collectively lost 5% market share last year. last.

“With the economy doing well, unemployment and interest rates low, and available inventory tight, vehicle buyers looking for bargains will be challenged,” Chesbrough said.

At least used car prices should stabilize. Once automakers begin to replenish their inventories of new vehicles, used vehicles should return to a more normal depreciation cycle this summer. However, they are not expected to collapse.

“This is not a price correction,” Cox Automotive chief economist Jonathan Smoke said. “We don’t believe the fundamental ingredients are in place for a collapse in demand. It’s probably not given the macroeconomic backdrop.

With US unemployment at a 50-year low, the US economy is expected to grow at least 3.5% this year, according to the Conference Board, twice the rate of economic growth before the pandemic.

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