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cartastrophe

Cost of living crisis may stop rapid inflation of secondhand car prices

Brexit and a shortage of car supplies meant that demand for secondhand cars was unprecedented.

IRISH USED CAR prices have risen 63.7% since the beginning of the pandemic, while asking prices for cheaper cars have almost doubled.

In the past six months alone prices have risen by 29%.

Donedeal’s quarterly report for Q2 of this year also showed that Electric Vehicles (EVs) and hybrids are still experiencing unwavering price growth.

Prices for used hybrid cars rose by 2.8% in Q2 2022, in line with the average quarterly rate of inflation since the pandemic.

But EVs experienced a quarterly rate of inflation this quarter of 6.6%

For all cars, prices rose an average of 5.9% per quarter since the beginning of the pandemic, far higher than the average quarterly rate of inflation of 0.8% in the 2 years prior to the pandemic.

The report blames Brexit and global component shortages for this due to the damage to the available  supply of second-hand cars.

Simultaneously, increased demand from people buying cars with their pandemic savings acted to make prices rise at rates never before documented in Ireland. 

However the report notes that the rate of inflation is slowing, showing signs of price stabilisation in the market.

As inflation bites in the wider economy, the cost of living and increased interest rates has subdued demand. 

At the end of June the rate of price inflation has slowed to 3.9%, thus giving signs that the price volatility in the overall market for used cars might at last be stabilising.

Economist Dr. Tom Gillespie, who authored the report, stated that if the car market was tracked during the pandemic “then it surely acted as the canary in the coalmine for inflation in the wider economy”.

An analysis of demand related metrics on DoneDeal indicates that car demand is down 2.4% year on year but still 12.4% above pre-pandemic levels.

The report noted that there is still high demand for cheap cars from the mid 2000s and predicted that prices in the lower end of the market will continue to rise until buyers decide that its more affordable to import a car from the UK and pay tariffs on it.

Cheaper cars were an average of 41% more expensive in June than they were in June 2021.

Gillespie added:

“From an emissions reduction perspective, this is problematic, as older cars generally emit considerably greater levels of CO2 and harmful particulates.”

Ireland’s rate of inflation in the price of second-hand cars far outstrips the UK’s, with Auto Trader reporting that prices have risen 35% since mid 2019.

The average price increase in this time was £4,454 (€5,224) and prices had been on the rise for 27 consecutive months.

Note: Journal Media Ltd has shareholders in common with Done Deal Ltd.

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