Why are used cars so much more expensive now than they were two years ago?
Car dealers say a “perfect storm” of circumstances has limited supply at a time when demand remains high.
In January 2020, you could have bought a 2009 Volkswagen Polo for about €2,890.
A good starter car, to be sure, though a little less appealing when you factor in the high cost of insurance.
Now, though, that same car is valued at almost €4,000.
A 2013 Audi A3 was valued at €10,250 in January 2020. With normal depreciation, it would have cost in the region of €6,900 by now. However, it’s now valued at €12,400.
Our lives may seem like they’re in a sort of perennial stasis due to this awful pandemic, but we’re now two years on from January 2020, and one of the many industries which is vastly different two years on is the used car industry.
Earlier this week, car dealers accused the Government of steering the used car market to a point where prices are now 56% higher than the start of the pandemic.
The latest DoneDeal car price index pointed to Covid restrictions and Brexit as playing a key role in the rising prices, which have risen by 7.7% since October alone.
And while used car prices are rising elsewhere too, according to the DoneDeal index, price rises for used cars in Ireland are outstripping the growth in both the UK and US.
A major factor feeding into the rising prices is the dearth of supply when compared to pre-pandemic levels.
Many car dealers source their used cars from abroad. Previously, Britain was a major market, and the figures show the number of cars being imported into Ireland was way down last year when compared with previous years.
The Society of the Irish Motor Industry (SIMI) publishes monthly stats on the number of cars registered in Ireland, and last week provided an annual breakdown comparing 2021 to 2020 and 2019.
For the whole year 2021, the number of used car imports was 63,317. This was down 20% on 2020, which was itself a disrupted year due to Covid. It was also down 44.2% from the 113,926 car imports in all of 2019.
In December alone, the number of used car imports was down 71.7% on 2020 and 63.8% on 2019.
So where have all the cars gone?
“The demand hasn’t increased, it’s the same it’s always been,” said Chris Lawlor, the owner of Lawlor Motors based in Dublin’s Park West area.
“It’s the fact that if one cog in the supply chain is broken for a period of time, that creates a backlog then. That same demand is there but there’s that bottleneck.
"I’ve heard of dealers ringing customers up now a year later asking customers if they want to sell the car back to them for the same price. It creates a backlog and a load of pent-up demand.”
That cog in the supply chain cited by Mr Lawlor is the worldwide shortage of semiconductor chips that are essential in car production. And, while these chips are needed in cars, they’re also needed for a host of devices, such as smartphones and game consoles.
The problem is global, but a drop in output from China – a huge producer of such chips – during the pandemic has had ripple effects across many industries.
Just this week, Intel’s chief executive Patrick Gelsinger predicted another year of “very constrained supply chains” and the shortages will continue into 2023.
Mr Lawlor said the gap in production means people are having to put off buying a new car while, at the same time, retaining the car they would then trade in so that is “filtering down” into the second-hand car market.
Ireland isn’t alone in being affected by this, but what’s helping to drive the price of cars up more here is our reliance on Britain for second-hand car stock.
“We bring in a lot of our stock from England,” Mr Lawlor said.
“It’s making the cost of bringing stuff in general – because the price of stuff is gone up anyway over there – it makes it less feasible.”
And Brexit is not an insignificant factor when it comes to the price of second-hand cars now in Ireland as importing cars from Britain has now become a lot more expensive.
Between VAT and customs duty, the cost of importing jumps by about 33% on what it used to be. When this extra cost of importation from a key trade partner combined with the scarcity of supply caused by the semiconductor shortage, it created the “perfect storm” according to Mr Lawlor.
“Two years ago, I was selling stuff for the same price that I am now,” he said. “Say a 2016 or 2017 car, I’m selling for the same price two years ago as I am now.”
Denis Murphy, managing director and joint owner of Blackwater Motors in Cork, said the supply shortage is contributing to the current pricing issues, but Government decisions have also played their part.
“We expect the supply issue to be resolved by July but the industry warned Government about all of this and still they went ahead and made certain decisions,” he said.
It certainly doesn’t make it easy. Dropping into a friends WhatsApp group that I was taking a look at this topic, the reaction of those who are actually looking to buy a car was a mixture of shock, frustration and bemusement.
One is looking to get a bigger car to accommodate his growing family.
“I’m looking to get a Renault seven-seater for preference,” he said.
“Lots of room in it, it won’t be driven much and the Renault is cheap. The plan was to get a seven or eight-year-old car for about €7,000 with the trade-in.”
He said a friend of his living in Belgium got a similar deal when getting one for himself.
“I’ve been to our local garage and a few dealerships, they’re all saying the same thing, there’s no supply, and what there is overpriced,” he said.
“Our car isn’t in great condition itself but even that’s increased in value. It’s now €4,500 when I thought we’d be lucky to get €2,000.
“So I’m in a quandary: chance my arm with the current car for a few months until things calm down, pay money we don’t have for a car that isn’t worth it, or buy an older car, which comes with its own problems.”
When it comes to starter cars, while prices are certainly higher than before, it’s still very much a case of you get what you pay for.
In Cork today, for example, a 2006 Toyota Yaris 1L petrol is selling for €2,300. A 2011 Renault Clio 1.2 in Carlow is going for €3,600. A 2013 Peugeot 017 1.6 diesel is going for €4,900 in Tipperary.
To get it under the €2,000 mark, you’re talking cars that are at least 12-13 years old at this point.
When it comes to the family car, and you’re looking for extra space, a dealer in Cork is selling a 2015 Opel Zafira 2l seven-seater for €12,400. A Mazda5 from 2015 is selling for €14,995.
In Limerick, you can get your hands on a 2014 Ford Galaxy 2.0 for €8,495, while a 2014 Kia Carens is retailing at €9,950 in Galway.
So, even with the possibility of trade-in, you’re looking at spending a fair amount on the new family car.
Looking at some of the pricier ranges, a 2018 Nissan Qashqai 1.5l in Cork is retailing at €23,490. A 2019 Renault Kadjar is going for €24,990.
A 2014 BMW 4 Series 2L is selling for €20,950 in Limerick while a 2015 Mercedes Benz E- Class is going for €20,900 in Dublin.
And what does that all mean for the consumer on the ground looking to buy a car?
Your euro won’t go anywhere near as far as it did before the pandemic, and that leaves the buyer with a choice of whether to stick – with the car they currently drive – or twist. For people starting off, it means they’re paying that bit more to get on the road than they would have just two or three years ago.
Currently, it’s very much a matter of either taking your time and waiting to see if prices stabilise, or taking a punt now.