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Economy F&I Industry Trends

2022 Predictions: Demand for Units Bodes Well for Dealers

2021 has felt like a dance with very complex steps, back and forth. In the first half of the year, the economy took a step back with severe semiconductor chip shortages, persistently high levels of COVID-19 infections across the country, and challenging labor shortages. As a result, the seasonally adjusted annualized rate (SAAR) for August dropped to 13.09 million, reflecting a steady decline since the April peak of 18.5 million according to Motor Intelligence. The August reading was the weakest of the year and the lowest since June 2020’s 13.23 million rate, early in the COVID-19 pandemic.

Now, we are experiencing a different story. According to TD Economics, in October, U.S. vehicle sales took a step forward, rising by 6.5 percent month-over-month to 13.0 million SAAR units. Last month’s gain came in well ahead of expectations, which called for a more modest gain to 12.5 million units. These forward steps brought an end to five consecutive months of declines.

However, inventory availability is still taking a step back, putting a false cap on consumer demand. New vehicle inventory remains compressed, with estimates for October revealing that dealership supply slipped to an all-time low of just 20 days. The combination of strong demand and limited inventory has continued to exert upward pressure on new vehicle prices, which are estimated to be up nearly 20 percent from last year’s levels. The October gain indicates that at current depressed production levels, 12 million seems to be the natural floor for sales.