2021 was a banner year for wholesale vehicle values. On a full-year basis, we saw values above pre-COVID/2019 levels by 30% for the year, as a perfect storm in used vehicle demand faced a perfect drought in used vehicle supply—much of which was brought on by the chip shortage.
As we look ahead to 2022 and what the year may bring for our industry, there are several key things to keep in mind and look out for as the year unfolds—consider this my Kontos Krystal Ball:
Repossessions will probably be the “first responders” to the used car shortage. Because of government stimulus plus deferrals and forbearance programs that banks and lenders have provided, people were able to postpone or avoid potential repossessions. We will possibly now see an uptick in repos as these programs are slowly phased out—not back to pre-pandemic levels, but we should see increases.
In mid-2022, I suspect we will be talking a whole lot less about the chip shortage, as manufacturers use creative new approaches to address this problem. New car inventory will move closer to normal helping used vehicle demand stabilize.
I also anticipate more stable wholesale values—in other words no dramatic rises or falls in 2022. We will likely see a return to pre-pandemic seasonal patterns with the usual uptick during tax season in the spring, and a gradual softening the rest of the year.
In general, I will be keeping my eye on the economy—focusing on employment, inflation and GDP growth. One area that is of major concern to many economists is inflation and the spillover impacts that might accelerate higher interest rates that could potentially make new and used vehicles less affordable.
As we transition to renewables from fossil fuels and electric vehicles from internal combustion engines, it’s going to be costly and will take a while to figure out how we will produce and consume energy in a new way. These things take time and will be expensive in the near term. This is important to keep in mind, as we see more and more electric vehicles entering the car ecosystem.
In short, 2021 brought us new records in pricing and new lows for inventory. I’m looking forward to analyzing trends for all of our customers and partners throughout 2022 with the hope that greater stability will be beneficial to both.
Disclaimer: The views and analysis provided herein relate to the vehicle remarketing industry as a whole and may not relate directly to KAR Global. The views and analysis are not the views of KAR Global, its management or its subsidiaries; and their accuracy is not warranted.
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