TrueCar’s used-vehicle sales forecast for March called for a double-digit rise on a sequential basis, but a double-digit drop on an annual comparison.

An anecdote from Brian Finkelmeyer, who actually is the senior director of new-vehicle sales strategies at Cox Automotive, might provide a vivid image of how used-vehicle sales unfolded to close the first quarter.

“With sales volumes down in the first quarter due to continued inventory shortages, we are seeing dealers increasingly move to pre-selling both new and used vehicles,” Finkelmeyer said in a news release. “Just last week, we spoke to a dealer in South Florida who had a newly acquired 2018 SUV on a lift for inspection, and three different sales consultants brought customers into the shop to see the vehicle. The vehicle sold before it came off the lift.

“This anecdote highlights the extent to which demand for good vehicles continues to well outpace supply. It’s going to take time for dealers to build back inventories, even as microchip availability improves. My forecast: The year ahead will continue to be a seller’s market,” Finkelmeyer continued.

TrueCar said through its news release that used-vehicle sales for March are expected to reach 3.6 million, which would be down 13% from a year ago and up 11% from February.

TrueCar also predicted that the average interest rate on used vehicle financed in March would be 8% with contract terms averaging 71 months.

New-model observations

While a new vehicle is not likely to be on a lift going through an inspection, new models are getting plenty of attention, especially if they’re actually on dealer blacktops.

Although Q1 new-vehicle sales volumes are expected to see a year-over-year decline, Edmunds analysts noted in their news release that vehicles are selling quickly.

Edmunds determined that in Q1, 41% of all new vehicles sold within the first week of arriving on a dealer lot, compared to 20% in Q1 2021.

“Skyrocketing gas prices were top of mind for consumers in March, but the lack of inventory is what ultimately depressed new vehicle sales in the first quarter,” Edmunds executive director of insights Jessica Caldwell said in the news release. “Automakers are still grappling with ongoing disruptions to supply chains and production created by the chip shortage and COVID-19; on top of that, they’re likely facing new challenges as a result of the invasion of Ukraine.

“This combination of headwinds could mean that these inventory issues will persist well into the rest of the year,” Caldwell continued.

Cox Automotive lowered its full-year new-vehicle sales forecast from 16.0 million to 15.3 million, as new-vehicle inventory levels have yet to show signs of recovery. And with recent disruptions from Russia’s invasion of Ukraine and a significant earthquake in Japan, Cox Automotive acknowledged it will likely take longer than initially predicited to get back on track.

“Auto sales will basically be stuck at the current level until more supply arrives,” Cox Automotive senior economist Charlie Chesbrough said.

Turning back to TrueCar, one of its experts mentioned a new-model trend with definite used-vehicle implications.

“This month in spite of low inventory, we’re seeing mild fleet recovery as we head into the summer season,” said Valeri Tompkins, senior vice president of OEM solutions at TrueCar.

Charged up for EVs & Hybrids

According to Edmunds days-to-turn (DTT) data, electric vehicles dropped to 21 days to roll over the curb in March, compared to 63 days last March. Edmunds said 39% of all EVs sold within the first week of arriving on a dealer lot in March compared to 24% a year ago.

Edmunds said a similar scenario unfolded with hybrid vehicles, which the DTT reading dropped to 15 days, compared to 48 days in March 2021. Analysts added that 54% of all hybrid vehicles sold within the first week of arriving on a dealer lot in March compared to 27% a year ago.

Cox Automotive research manager Rebecca Rydzewski also explained how higher gas prices in March led to a spike in shopping for electric vehicles and hybrids.

“Based on initial reports, that shopping in many cases converted into sales. Toyota sales of electrified vehicles, while down from a year ago on low inventories, represented a higher percentage of Toyota’s overall sales than in the year-ago quarter,” Rydzewski said.

“One in four Toyota vehicles are now electrified in some way to boost fuel economy. Hyundai and Kia combined sold nearly 15,000 of their new EVs, the Hyundai Ioniq models and the Kia EV6, a year-over-year gain of 241%. Honda had its best-ever month for electrified vehicles and even GMC got into the act with nearly 100 Hummer EVs sold in the quarter,” she continued.

“Our analysis of data on Kelley Blue Book and Autotrader showed shopping for EVs rose 69% as gas prices peaked in March,” Rydzewski went on to say “Shopping for hybrids increased by 32%. Shoppers even showed more interest in small, more-efficient cars in Q1. Our team is forecasting growth in electrified vehicles in the year ahead, and we certainly saw that in Q1.”

TrueCar noticed similar metrics since gas costs more than $4 per gallon in many places throughout the U.S.

“Over the last month we’ve seen a huge spike in electric vehicle and hybrid prospects on the TrueCar site, with a 380% increase year-over-year for EVs and a 180% jump year-over-year for hybrids,” TrueCar lead industry analyst Nick Woolard said. “This is the largest monthly jump we’ve ever seen and understandably so with current fuel prices.”

Overall views

Cox Automotive chief economist Jonathan Smoke summarized the entire automotive retail scene, as dealerships, auctions and finance companies all made their way through the opening quarter of the year.

“The first quarter of 2022 has been challenging for the economy and the auto market. In January, we had omicron driving record cases and in February, Russia invaded Ukraine, disrupting further an already fragile global supply chain with a surge in oil, gas, grain, and commodity prices. Consumer sentiment reflects quite a deterioration so far this year — consumers do not feel good about the present or the future,” Smoke said.

“Consumers are in a tough situation: Average hourly earnings growth remains above 5%, but real wage growth is negative, with inflation outpacing wage growth,” he continued. “If there is one bright spot, it’s employment. New jobless claims are now not only at a low for the pandemic, but at 50-year-lows, despite growth in population and jobs. The strongest part of the U.S. economy right now is demand, and we think that’s a good sign for the auto industry.

“In our most recent Dealer Sentiment Index, we found that dealers do feel good about the quarter ahead. I think this optimism is rightfully placed, as we expect the overall auto industry in the second quarter to be strong, despite the slowing economy and declining consumer sentiment,” Smoke went on to say.