Covid and Brexit see used car prices rise by nearly 50%

'In just three months since June, used car prices have increased by 10.6%,' says the author of the latest DoneDeal Car Price Index.

Covid-19 and Brexit-induced shock to the market have meant used car prices are now nearly 50% higher than they were just before the onset of the pandemic in February 2020, a new report claims.

“Price inflation is on an unprecedented upward trajectory and showing no signs of slowing down,” said Tom Gillespie, environmental economist at the National University of Galway and author of the latest DoneDeal Car Price Index.

“In just three months since June, used car prices have increased by 10.6%, the largest quarterly price inflation seen in used car prices in Ireland since the start of the DoneDeal data in 2011. 

"For context — the previous quarterly inflation rate in Q2, Q1, and Q4 2020 was 6.6%, 5.6%, and 3.5%, respectively. So not only are prices still increasing but also the rate of increase is speeding up, not slowing down."

Abnormal price growth

Dr Gillespie said choked supply due to Brexit and pandemic-induced delays on the production of new cars, coupled with increased demand from increased savings, are being widely cited as causes for the abnormal price growth.

"Used car prices are now nearly 50% higher than they were just before the onset of the pandemic in February 2020," he said. “These contributing factors are showing few signs of abating in the short term."

Dr Gillespie highlighted just how short supply now is compared to previous years.

“In 2019, the last ‘normal’ year in the used car market in Ireland, there were about 117,000 new car registrations and 114,000 used car imports, meaning a total of 231,000 extra cars in Ireland.

“By comparison, there were 168,294 extra cars added to supply in 2020 and there have been 151,782 so far in 2021.” 

He said a particular issue is the level of imports from Britain which totalled 108,083 in 2019 but amount to just 40,152 so far in 2021.

“Based on current trends, Ireland will likely see a total of 180,000 extra cars in the market in the year of 2021. 

These top-level statistics suggest that the deficit of cars over the last 20 months is in the region of 110,000.” 

According to the report, Japanese used car imports are up 65% from 3,243 in 2019 to 6,068 so far in 2021, and although they are a relatively small share in terms of total used car imports, that share has grown from 2.8% of total imports in 2019 to 12% of imports so far in 2021.

Dr Gillespie also said that a lack of tourists in 2020 has meant that many car hire companies held on to their existing stock of cars, rather than release them to the used car market and replace them with new models.

“In a normal year, this offloading of the rental fleet equates to roughly 20,000 cars per annum."

Furthermore, the report shows that the boom in new car registrations from the Celtic Tiger years, which peaked in 2006 and 2007, is now "quite far in the past".

"As a result, the stock of those cars, at almost 15 years of age, is starting to fall off Irish roads," it said. 

"Nearly 670,000 new cars were registered between 2005 and 2008, compared to just 300,000 in the following four years 2009-2012, and — if 15 years is the life span for the typical car — the retirement of Celtic Tiger-era cars is also putting pressure on overall car market supply."

Among the other headlines from the report are that:

• 40% of Irish people intend to purchase a car this year;
• 60% of people say that they intend to spend a minimum of €15,000 on their next car. That is unchanged since the first half of the year;
• 45% of people in Ireland intend to buy hybrid/electric, up from 35% since the start of the year alone;
• 60% plan to trade in their car against their purchase from a car dealership, 26% said they planned to sell privately, with 14% saying they did not have a car to sell on.