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Home›Price index›Government accused of leading used car price spike

Government accused of leading used car price spike

By Susan Weiner
January 12, 2022
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Car dealers have accused the government of leading the used car market to a point where prices are now 56% higher than at the start of the pandemic.

This figure is cited in the latest DoneDeal Car Price Index, which indicates that Covid restrictions and Brexit disruptions have contributed to the surge. Its data shows that used car prices have risen 7.7% since last October alone.

This increase in the last quarter was the second highest quarterly price increase seen since 2011, only less than the third quarter of last year which saw a 10.6% increase.

The used car price inflation rate here has exceeded the UK rate, which is 33% for the same period, and the US rate, which has exceeded 47%.

Three examples illustrate the trends

The report provides three examples of used cars that have all seen their value increase since early 2020, including:

  • A 2009 VW Polo, which was valued at € 2,890 in January 2020 but which is now valued at nearly € 4,000;
  • A 2013 Audi A3 which cost € 10,250 two years ago and is now valued at € 12,400;
  • A 2015 BMW 5 Series, which this time was € 19,450 two years ago, but which is now valued at € 20,150.

Tom Gillespie, environmental economist and author of DoneDeal’s Engine Price Index, said supply chain disruptions caused by the pandemic and Brexit have combined to create a perfect storm for the used car price inflation.

He said consumer demand for new and used cars from car dealerships is also at an all time high – up 80% from January 2020.

Last year’s persistent under-supply of semiconductors, a crucial component of new cars, has forced automakers to cut production. With growing demand spurred by economies linked to the pandemic, consumers turned to the used car market, where supply was also under pressure.

The index shows that the price gap between new and used cars is not only narrowing – in rare cases a used version of the same model is offered at a higher price than its new counterpart.

However, Denis Murphy, managing director and part owner of Blackwater Motors in Cork, said he had seen no evidence of this. He blamed the government for the surge in prices and said political decisions, combined with the shortage of supply, led to the current situation:

We expect the supply issue to be resolved by July, but the industry has alerted the government to all of this and has made some decisions nonetheless.

“Until they reduce VRT to make cars affordable, things will continue like this.”

The flow of used cars from the UK increased from 108,000 in 2019 to 47,034 last year. The number of used cars imported from Japan increased from 3,243 in 2019 to 9,805 in 2021.

At the start of 2019, only 2.4% of all car registrations were fully electric, but that figure quadrupled to 10.5% at the end of last year.

Mr Gillespie said: “70% of those polled for a study accompanying the price index said they plan to purchase electricity within the next five years. As the auto industry adapts to these fundamental changes, so should government policy. “

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