Asking prices for used cars now 56% higher than they were before the Covid-19 pandemic
The rate at which the price of used cars is increasing has reached a new high, driven by the supply shortages caused by the Covid-19 pandemic and Brexit.
In the last three months of the year, the inflation rate for used cars grew a further 7.7%, the second highest quarterly price rise since 2011, according to online marketplace, DoneDeal.
This means that on average, asking prices for used cars are now 56% higher than they were before the Covid-19 pandemic arrived in Ireland in 2020.
This compares to similar rates of 47% in the US and 33% in the UK.
According to DoneDeal, the extreme inflation means in some cases a second-hand version of the same model of a car is being listed for a higher price than a new one.
At 83%, price inflation has been particularly high in the cheaper end of the market, as the glut of cars bought during the Celtic Tiger era peters out.
Previously, the shortfall in second hand cars in the Irish market had been made up by imports from the UK.
But since January of last year, changes as a result of Brexit have made UK imports far more expensive, making them less attractive and reducing the incoming supply.
Prior to the pandemic and Brexit, 108,000 cars a year were imported from the UK.
But this fell to 74,900 in 2020 and 47,034 last year, a drop of 56% from 2019 levels.
According to DoneDeal, that deficit has led to a doubling of used cars imported from Japan.
Nonetheless, TCD and NUI Galway environmental economist Dr Tom Gillespie, who analysed 5 million DoneDeal vehicle listings from 2011 to last year as part of the research, estimates that there are still around 125,000 fewer used cars available compared to pre-pandemic times.
Disruption to the new car supply chain, caused by the pandemic and the worldwide shortage of semiconductors, has also increased demand for used cars, driving up prices in the process.
In 2018 and 2019 there were 125,671 and 117,109 new car registrations, according to the Society of the Irish Motor Industry.
However, in 2020 and 2021 this plummeted to 88,325 and 104,932.
Speaking on RTÉ’s Morning Ireland, Dr Gillespie said: “We have a slowdown in the production of new cars. If there’s a long waiting list for new cars people are incentivised to turn to the used car market.
“There’s also an increase in demand due to more reliance on cars since the pandemic and that’s just created this perfect storm for use car inflation. It’s happening in the UK, in the US and other markets around the world. But in Ireland this has been compounded by the manifestation of Brexit,” he said.
Dr Gillespie said it is hard to say how long this situation will continue, as a “levelling off” cannot be seen in the near future.
“People are suggesting that the semiconductor shortage will last well into 2022. The shock in new car supply directly affects the used car markets. So it doesn’t look like it’s leveling off anytime soon,” he added.