supply and demand

As 'unprecedented' inflation bites, the gap between Irish used and new car prices is tightening

In some cases, a second-hand car is being listed with a higher asking price than a new version of the same model.

IRISH USED CAR prices have jumped 56% from the outset of the pandemic to the end of 2021, outstripping the rate of inflation in the United States and the United Kingdom over the same period.

At the same time, electric vehicles (EVs) represented a growing share of new registrations last year. Compared with the first half of 2019, when fully electric vehicles accounted for just 2.4% of new car registrations, that figure had quadrupled to 10.5% in the second half of last year.

The figures are contained in the latest DoneDeal quarterly Motor Report for the final three months of 2021.

It reveals the price of second-hand cars has increased by close to 8% from October 2021 to the end of December alone.

By contrast, the rate of inflation observed in the US and the UK markets for used cars was 47% and 33% respectively from the beginning of 2020.

It means that the price gap between new and used cars is tightening in Ireland, leading to the “unprecedented situation” in which some second-hand versions of the same model of car are being listed for more than their new counterpart, DoneDeal said.

A unique set of factors — including Brexit and the impact of the post-2008 recession on new car registrations — are constraining the supply of used cars and helping to buoy prices, the report highlights.

Since Britain’s withdrawal from the European Union in January 2021, second-hand car imports from England, Scotland and Wales have been subject to VAT and a range of new customs formalities.

As a result, used-car imports from Britain have fallen dramatically.

“In 2019, just before the onset of the pandemic and Brexit, we imported 108,000 cars from the UK,” according to the report’s author, economist Dr Tom Gillespie.

“In 2021 the total number of used car imports from the UK was just 47,034, a fall of 56% from 2019 levels.”

It means there is a deficit of used cars is in the region of 125,000 vs normal trading conditions. This “has led to a doubling of the number of imported used cars from Japan, from 3,243 in 2019 to 9,805 in 2021″, according to Gillespie. 

The obsolescence of older vehicles is also contributing factor.

After an uptick in new car sales in the latter part of the boom years between 2005 and 2007, new car registrations dipped in the aftermath of the crash, between 2009 and 2015.

So where previously the supply of used cars was “aided by the glut of Celtic Tiger year cars”, Gillespie explained, “this ageing cohort of cars is rapidly becoming obsolete, hitting the lower end of the market hardest”.

All of this means that consumers looking to trade in their old vehicles have stronger bargaining chips as car dealers struggle to maintain their inventory”, he added.

But the other big story of the past two years or so has been “the seemingly unstoppable rise of electric and hybrid vehicles” Gillespie said.

According to the report, in the first half of 2019, just 2.4% of new car registrations were fully electric. In the second half of 2021, that figure has quadrupled to 10.5%.

It’s the same story with hybrids, which accounted for only 9.4% of new vehicles registered in the first half of 2019. That figure had ballooned to 27% in the second half of last year.

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