How big pent-up demand is for new vehicles

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New car dealers are seeing high levels of demand for vehicles and one industry analyst believes it could take years to satisfy consumers.

The Haig Group released its report on the first quarter of 2022, tracking trends in auto retail and its impact on dealership values. Dealers are seeing record-high earnings backed by higher prices for new vehicles and no slowdown in demand despite an increase in interest rates, gas prices and inflation.

While highlighting that “this is a good time” to be in the auto dealer space, Alan Haig, president of Haig Partners, acknowledged questions about how long these good times could last and how long customers will be knocking on dealers’ doors for vehicles.

In his opinion, it’ll take at least three years.

“Our math indicates that the level of pent-up demand is so high that it will take three or more years before consumers will be satisfied and we would return to a situation where supply and demand would be in balance again,” he said.

Indeed, another recent report agreed that there is pent-up demand among consumers for new vehicles. But there are challenges, noted The Freedonia Group.

Used vehicles, despite increasing in prices, will also compete for market share as lower-priced alternatives to more expensive new vehicles. However, a limited inventory of used vehicles could lessen its impact on new vehicle sales.

The report also noted that short-term sales growth will be pushed by pent-up demand. However, product availability remains a challenge. A continued shortage would see an increase in demand but a shortage in sales and a barrier to faster sales growth.