Car Sales Off to a Sluggish Start in 2022

Cox Automotive said it expects limited supplies to keep car sales weak through the rest of winter, which might help contain prices.

In its new car forecast released Wednesday, Cox Automotive said new cars are to be sold at a seasonally adjusted annual rate of 14.4 million vehicles in February. That would be down 4.3% from January and down 9.6% from the 15.9 million rate a year earlier.

Used car sales are also down. On Tuesday, Cox Automotive estimated the seasonally adjusted annual rate (SAAR) for used car sales were 32 million in January, down 11.5% from December and down 18.6% from a year ago.

Credit unions are a major player in auto lending, holding about 31% of the value of those loans in December. A recent report from CUNA showed that credit unions held $408.2 billion in auto loans Dec. 31, up 5.9% from a year earlier, while the Fed showed that auto loans grew 7.7% to $903.4 billion among other lenders.

The Cox Automotive report noted that the number of February selling days was the same as a year ago. And new-vehicle inventory is now 62% below last year, including a drop last week after rising for many weeks.

Charlie Chesbrough, senior economist at Cox Automotive, said the decline in sales pace is not due to seasonal adjustments, but rather a tight supply situation that continues to hold back the market.

“The market is heading into a very interesting period,” Chesbrough said. “With low supply and low sales volume, and no tangible market change expected, a big decrease in the sales pace — a sizable drop in the SAAR — is likely in the offing for next month.”

That would be a relief for car buyers. Edmunds, a car-buying analytics company based in Santa Monica, Calif., reported earlier this month that buyers paid above the manufacturer’s suggested retail price (MSRP) in a record 82.2% of all new vehicle purchases in January, compared to 2.8% in January 2021 and 0.3% in January 2020.

Edmunds found the average transaction price for a new vehicle climbed to $728 above MSRP in January 2022, compared to $2,152 below MSRP in January 2021 and $2,648 below MSRP in January 2020.

Jessica Caldwell, Edmunds’ executive director of insights, said those numbers would have been “unthinkable” just a year ago.

“This is in part driven by affluent consumers being willing to shell out more cash to get the vehicles that they want, but there’s also a vast population of individuals who are being forced to do so simply because they need transportation and have no other choice,” Caldwell said.

Chesbrough said the quirks of seasonal adjustments mean relatively strong SAAR can be reported in the winter, when low sales volumes are expected, which he said happened in January and February.

“But come spring, when sales are expected to be much higher, the SAAR will look particularly weak,” he said. “Without a big jump in inventory, March’s SAAR is going to show a significant decline.”

For used cars, January’s 32 million SAAR was down from December’s 36.2 million level, and down from January 2021’s sales pace of 39.3 million.

“Used-vehicle inventory has improved since last summer’s supply drought, but product availability remains well below pre-COVID levels,” Chesbrough said.

Retail used-vehicle sales — vehicles sold via a dealership, thus removing private party sales — were 18% lower in January than a year earlier. The January used retail SAAR estimate was 16.9 million, down from 20.5 million last year and down from 18.9 million in December.