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The Importance of Pre-orders and Selling Out of Your Pipeline in a Low Inventory World
Pre-orders have Emerged as a Solid Way to Increase Sales in a Low Inventory World.
Vehicles have increased in price by nearly 17.4%, and trucks following suit with an 8% increase over the last two years.
The auto sector has witnessed huge growth in both new and used car sales over the last year, with the latter experiencing some of the highest prices in history.
However, the trend may be shifting. Recent automobile industry occurrences may indicate that used car sales are not as high as they were last year. What are the indicators, and why is this shift taking place?
Used automobile prices fell 1% between March and April 2022, according to Cox Automotive's Manheim Used Vehicle Value Index. This is the third consecutive month of price reductions since the beginning of the year. Furthermore, wholesale prices have declined 6.4 percent since January but remain 14 percent higher than this time last year. The drop isn't solely due to lower prices; sales dropped 13% between March and April. The major impact of growing inflation could be the culprit. Consumers must pay more for goods and services across multiple industries, which means they may not be able to afford a still-expensive used automobile. A protracted price squeeze could reduce demand and pricing.
More indications of the used car market cooling emerged for auto sellers such as AutoNation and CarMax. Used car sales increased by 47 percent at AutoNation, but profit margins declined by 10 percent. Analysts have recently expressed concern about the company's decreasing profit margins and unpredictable first-quarter results. Furthermore, CarMax's problems with used vehicles began in 2021. The company saw a 6.5 percent drop in used car sales at outlets open 13 months in the fourth quarter of last year. CarMax CEO Bill Nash outlined some of the causes for the current dip in sales, saying, "From an affordability sense, you've got interest rates going up, inflation, and the Ukraine-Russia confrontation." There's certainly a lot on the consumer's mind right now."
This steep fall in automotive supply and subsequent increase in demand has been caused by a sluggish supply chain over the last few years, a problem that will most likely correct itself in the near future. So, what may this future look like? Even in these uncertain times, it is quite likely that used automobile prices and sales will revert to pre-pandemic levels, signaling the return of normalcy. "The anniversary of the chip scarcity – when prices began to rise – is nearing," said Charlie Chesbrough, senior economist at Cox Automotive. Year-over-year growth rates will level out. Prices, however, will not fall below zero. Rather, they should resume more regular growth patterns, albeit from a greater base."
According to reports, used vehicle prices went from an average of $23,194 in early 2020 to a staggering $33,928 in mid-2022. That's a 16.9% increase, year over year. New vehicle prices went from $36,072 in early 2020, to $45,704 in mid-2022, with an even greater 18.3% increase year over year in tow. Vans, Cars, and SUVs all had a major increase in price over this time period, with an average price increase sitting at 17.4%, with trucks following with an 8% increase in price.
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