![]() Thankfully for many, 2021 is behind us. However, as we enter 2022 some of the negative aspects of the year that must not be spoken will continue to rear their ugly heads. Among them: vehicle inventory and pricing. New car inventory levels started to recede in 2020, driven by a global shortage of semiconductor chips. In tandem with other pandemic related blips to the supply chain, inventory got downright ugly in 2021. Lack of new cars led to huge demand for used vehicles, driving those prices up and creating a snowball effect across the auto industry.
A report from JD Power indicates 89% of new car purchases were at or above MSRP in 2021, compared to only 12% in the pre-pandemic period measured in December, 2019. In addition, the cost of an average new car rose from $40,000 to $45,000 comparing 2020 to 2021. Needless to say, manufacturers and dealers held onto their precious commodities, only having them pried from their cold hands by absurd consumer spending behavior. Two trends that will remain in 2022, and perhaps beyond: lower inventory on the lots and little to no negotiation off MSRP, particularly for in-demand models. Incentives, including manufacturer rebates and third party vendor associations are also fewer and far between. Expect to order your car and pay more than you have historically for it, the last 12 months notwithstanding. On the flip side, there are signs that the used car market is coming back to earth. This makes sense since buying a three year old car for higher than the price it cost new was absolute batshit, and is in no way sustainable. Analyst Carl Quintanilla commented recently, “Inventory of used cars and trucks is now more than 20% above normal.. Accordingly, the next few months will bring the start of a decline in prices.. rates for new and used vehicles.. ought to drop substantially by the spring, dragging down overall core inflation.” So, for the average consumer there are some favorable signs, but those looking for the unicorn deals of yore are sure to remain sorely disappointed. In particular, the luxury market appears poised to continue its upward trajectory. The Wall St Journal recently projected that upscale brands such as Bentley, Rolls Royce and BMW will experience higher growth in sales than Main St. brands, and that within a manufacturer’s inventory the coveted semi conductors will be reserved for the highest priced (and thus most profitable) models. Will you be manually rolling up and down the windows on your ‘average’ $45,000 new car? Could be. Only time will tell. As always, if you are looking for help navigating this fluid and treacherous auto market, or simply don’t have the time or energy to interact with dealerships and hear about how “inventory is tight and this is the best I can do”, shoot me a message or check out my services. Thanks for reading, and I wish you all a 2022 full of health, happiness and the open road.
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