Used car prices will substitute for the better because demand outstrips supply

During normal hours, car costs are one way.

The very move away from selling wiped a fraction of the money out of the value of a car, starting an unstoppable slide that would continue until a decade or so later when it was as useless as nothing. worth scrap.

Not anymore.

In the idle months from the spread of the disease, used car prices continued to rise, causing a shortage of supply and demand due to the coronavirus crisis and chip shortages.

Earlier this year, the largest increase recorded was 1 percent in February 2018. In May, they rose 6.7 percent, according to data group Cap Hpi, which has tracked live prices since then. 2012.

“Usually when cars are removed, the cost doesn’t go up,” said Derren Martin, head of valuations at the data group. “But right now cars are an investment.”

Rising prices are being felt across forecourts in the UK, Germany and the US with fears that inflationary pressures could increase in other parts of the economy.

In Germany, used car prices reached their highest period in April, according to AutoScout24, a leading marketing site. The average price during the month was € 22,424, more than € 800 more expensive than at the start of 2021.

In April of 2020, the average price was € 20,858, up about € 200 a year.

“In the past, due to the weather, the price curve usually fell at the beginning of the spring and summer months,” said the company, which has about 2m cars on its site.

The reason for the turnround was “probably a very limited supply,” it added, “but the increasing popularity of luxury cars and classic cars has also caused the average price to rise.”

In the UK, a one -year -old Audi A3 now costs £ 1,300 more than the equivalent model a year ago, an increase of 7 per cent, while the Mazda MX5 sports cars are up 50 per cent.

“I’ve been doing it for 28 years, and now I can still see it happening,” said Daksh Gupta, chief executive of UK retailer Marshall Motors.

Small number of bar char shoing supply and demand for auto parts by body class.  % year-on-year change in the UK market

Other times were after the financial fall of 2008, where prices rose in 2009 because demand recovered more quickly than the industry could sustain.

This time, there are two main factors at play.

Demand for cars has been on the rise since late last year, as consumers with money saved by working from home and canceling holidays abroad are on the rise.

Sports cars and convertibles are more strongly expressed, but there are increases in every category, with many motorists still seeking to avoid public transportation.

A German survey by Deutsche Automobil Treuhand, which collects data on behalf of industry bodies, found a third of used car buyers buy a second car to help others in their household avoid public transportation.

“This is the highest level of used car demand I’ve seen,” said Robert Forrester, chief executive at Vertu Motors.

Auto Trader visits jumped as consumers searched for second -hand cars © Angus Mordant / Bloomberg

Visits to Auto Trader, an online auto marketplace that specializes in used models, were 39 percent higher than in 2019 before the pandemic hit.

“Everyone thought it didn’t have to leave, but it went on,” said Ian Plummer, commercial director at Auto Trader.

But the real infusion comes from the supply.

Chip shortages caused by the pandemic were exacerbated by hurricanes in Texas and a fire at a Renesas plant in Japan, one of the world’s leading semiconductor manufacturers.

The industry has left millions of cars short, with little hope of finishing the lost volumes until next year.

At the same time, stocks are small because few motorists are selling new models and car rental groups are not offloading motors.

Line chart showing Growth in one-year auto use, indexes return

Entrepreneurs also make a lot of money.

“If they had enough cars, the dealers would be in a pretty good place right now,” said Mark Lavery, Cambria’s chief executive. “The demand is bonkers.”

But eventually the supply of new cars will run out.

“New car buyers can think of a one to two-year-old car, but anything older and they despise it,” said Ivan Drury, head of used cars at U.S. data group Edmunds.

The imbalance of supply and demand will also worsen before it heals. Only one resolution to the chip crisis, and a return to normal production levels will block the tide.

“When did it end?” said Auto Trader’s Plummer. “It all depends on the balance of supply and demand, and how long we’ll stay as passionate about cars as we do now. It’s clearly months, but if it’s years, we don’t know yet.”

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *