As prices soar, our auto editor tells you what’s happening in the used car market.
Why are used car prices so high right now?
There are a number of factors at play in the used car market right now, but one of the biggest is the consequence of the Brexit deal.
If you import a car from the UK, you now have to pay VAT and in some cases 10% customs duty, which makes imports much less attractive. As a result, imports have fallen this year by 34.4% and by almost 60% compared to 2019. In addition, the global shortage of chips is causing supply problems for new cars. It had been expected that production volumes would start to improve towards the end of the year; however, the war in Ukraine is compounding supply chain issues.
All of these factors, combined with rising consumer confidence and high post-lockdown spending levels, have driven up used car prices
Can we expect to see prices fall?
Used car prices are likely to remain higher than they were before Covid-19. However, while the supply issues won’t be resolved any time soon, the current pressure on personal finances will lead to lower demand, which could lead to price stabilization.
What does all of this mean for me if I’m looking to buy a used car?
Prices for all used cars have increased dramatically after Covid-19, so no matter what you buy, you will pay more now than 12 months ago. However, not all makes and models have grown to the same extent; soaring fuel prices are increasing demand for electric and hybrid cars, so prices are rising faster in this segment.
My PCP contract is coming to an end. What will be the impact of used car prices?
Those nearing the end of a PCP contract are in a good position. A Minimum Guaranteed Future Value (GMFV) represents what the car will be worth after the PCP is completed. Given the current situation, the real value of the car is likely to far exceed what was expected at the start of the contract. For example, your GMFV may be €10,000, but the car is actually worth €13,000, which gives you a capital of €3,000.
Used car prices also drive up car rental prices; car rental companies are struggling to replace their fleets as car prices rise and manufacturers prioritize deliveries to customers.
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