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What Dealers Can Expect from the Used Car Market in 2022

man handing a car key to a woman

How long will the high demand and prices last? Read on to find out what dealers can expect for inventory, pricing, and other trends in the used car market in 2022.

Inventory shortages will continue

While the chip shortage and low-inventory climate won’t go away any time soon, we do expect a gradual improvement over the course of the next year. This means that the height of the used car market is now. According to the ZeroSum Market First Report, after four consecutive months of declining used inventory levels, used vehicle inventory rose over 6% between December 2021 and January 2022. At the beginning of February 2022, used inventory levels rose another 1.7%. Although used inventory is still down 3.5% year-over-year, this may signal a turning point for the market.

While new vehicle inventory is still down about 62% year-over year, inventory levels have increased since December 2021. This could alleviate some of the upward pressure on new and used car prices, as there will be more new inventory available. However, this will be a slow recovery, and now is the time to put more focus on your used car inventory.

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Used car inventory will drive customers to dealer lots

Right now, most shoppers are paying a premium for their cars. According to the ZeroSum Market First Report, the average used car price rose to $33,464 in February, which is about 1% higher than January and 38.5% higher than a year ago.

While prices may come down some as the year goes on, the used car market will still face high demand. “As we continue to see below average new car inventory available, I anticipate the price of used cars to remain higher than we typically see,” says Sarah Grajewski, VP of Dealer Success at ZeroSum. “I have spoken to multiple dealer principles this week who are starting to see customers pivot into a new vehicle when they came in to see a used vehicle in stock. The gap in price between inventory type on some models is thinning and makes sense in those cases to buy new over used. This will keep new vehicle turn rates and closing ratios on those leads very high. “


Auto buyers willing to drive further

With fewer vehicles available on the lot, many consumers have turned to the internet to increase their geography. According to Edmunds, prior to the pandemic, consumers were only willing to travel 47 miles for 2019 model year vehicles. In 2020, this number rose to 65 miles, and it is expected to continue to increase along with demand. With customers driving further to find the car they’re looking for, dealers should consider marketing within a larger radius. Dealerships must target their customers more precisely based on available inventory that matches their preferences if they want to turn more vehicles.


How long can this level of demand last?

According to J.D. Power, the average wholesale price of used cars is forecast to drop around 9% between Q42021 and Q42022, and ZeroSum’s data reinforces this prediction. This means that although prices at the beginning of 2022 remained high, it is likely that we see a decrease over time. However, it will take a very long time for prices to stabilize, and low inventory and high prices will persist for a while according to Tyson Jominy, head of data and analytics for J.D. Power. For dealers, this means you should take advantage of the high prices and demand by moving your used vehicles as quickly as possible. This will ensure you won’t lose money on trade-in costs as prices begin to decline. ZeroSum has products built specifically to sell your used car inventory and get your cars in front of the right active shoppers.

To see our updated forecast for June 2022 and beyond, read more here.

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About ZeroSum 
ZeroSum is a leader in software, marketing, and data. Powered by its SaaS platform, MarketAI, ZeroSum is simplifying and modernizing automotive marketing by leveraging artificial intelligence, data, and scaling ability to acquire new customers. ZeroSum is the first and only company that matches consumer demand with automotive data in real time. For more information, visit  https://www.zerosum.ai/.


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