Dealership Knowledge Centre

The car market in 2022 remains something of an unknown, with the prospect of further lockdowns, a shortage of insight as to how the next phase of the coronavirus pandemic might play out and the ongoing issues caused by the global semiconductor crisis.

It’s a perfect storm and one that makes it increasingly difficult for us to predict how our industry is going to react, but one thing is for sure and that’s that record prices seen on both new cars and used cars are destined to remain, as long as demand continues to exceed supply. A scenario that is likely to still be the same at the end of 2022 as it is right now.

But there’s also a risk because as car availability remains limited, consumers are learning that quite often their existing transport is perfectly good enough, and they’re diverting their funding elsewhere.

According to Tim Smith, Black Horse’s Head of Motor Finance, customers are already becoming less impulsive and more thoughtful when it comes to buying cars.

“People are able to go on holiday again, so there are now alternative routes for disposable income,” he said in a recent interview, ahead of Plan B restrictions being introduced.

“Buyers are set to be less impulsive and more thoughtful, but I do think the demand for used cars will remain strong.”

Smith described the current state of the used car market as ‘crazy’ with high prices and demand, strong car usage (up 15 per cent compared with pre-pandemic) and poor new car supply.

As to when he thinks the market will settle down, Smith added: “I think it would be a brave person to predict it, but there are a couple of bits that we need to split up.

“There’s obviously the supply issue with new cars due to the semiconductor shortage, along with shortages of aluminium, steel and rubber, but also it’s going to be trickier for consumers because they’ve got interest rate rises, tax rises and general price rises to contend with. I think the really interesting bit will be when new car production begins again in earnest and supply catches up with or potentially overtakes demand.

“I speak for all of us here – it has been a really, really tough two years, and there hasn’t been much time to celebrate”

Smith’s views are echoed by Car Dealer Magazine founder and CEO James Baggott, who believes that 2022 will still be a challenging year.

“It’s fair to say that 2021 wasn’t as liberating or enjoyable as many of us in the industry hoped for or expected,” he said, “because while there was a huge amount of pent-up demand in the market, there have been massive supply issues as well as difficulties with logistics and a stratospheric rise in used car values, driven in some part by the growth of online sales partners delivering cars to people’s doors and taking a lot of the risk factor out of a used vehicle purchase.

“And that’s how the industry has had to react, because in terms of achieving profitability in 2021, it was the only option we had. In 2022, it’s looking increasingly likely that new car availability will remain hindered and that used car prices will remain remarkably high across the board.

“It’s not going to be a normal year at all for the used car industry, if indeed we ever see normal again – as once the supply issues and lockdown variables start to ease, we’ll be looking at a very different used car parc, with far more electric cars and alternative fuel vehicles in the mix.”

One thing’s for sure – it’s not going to be a dull year.