Car dealers say a “perfect storm” of circumstances has limited supply at a time when demand remains high.
In January 2020, you could have bought a 2009 Volkswagen Polo for around €2,890.
Certainly a good entry-level car, albeit a little less attractive when you factor in the high insurance costs.
Now the same car is worth almost €4,000.
An Audi A3 from 2013 had a value of 10,250 euros in January 2020. With normal depreciation, it would have cost around 6,900 euros. However, it is now valued at €12,400.
Our life may seem like it’s at some sort of permanent standstill due to this horrible pandemic, but as of January 2020 we’re two years old now, and one of the many industries that’s completely different two years later is the used car industry.
Earlier this week, car dealers accused the government of steering the used car market to a point where prices are now 56% higher than when the pandemic began.
The latest DoneDeal car price index indicated that Covid restrictions and Brexit are playing a key role in rising prices, which are up 7.7% since October alone.
And while used car prices are rising elsewhere, used car price increases in Ireland are outpacing growth in both the UK and US, according to the DoneDeal index.
A major factor contributing to rising prices is the lack of supply compared to pre-pandemic levels.
Many car dealers source their used cars from abroad. Previously, the UK was a major market and figures show that the number of cars imported into Ireland has fallen sharply over the past year compared to previous years.
The Society of the Irish Motor Industry (SIMI) publishes monthly statistics on the number of cars registered in Ireland and last week provided an annual breakdown compared to 2021 with 2020 and 2019.
For the full year 2021, the number of used car imports was 63,317. This was a 20% drop from 2020, which was a disrupted year itself due to Covid. It was also a 44.2% drop from 113,926 auto imports for all of 2019.
In December alone, the number of used car imports fell by 71.7% compared to 2020 and by 63.8% compared to 2019.
In December alone, the number of used car imports fell by 71.7% compared to 2020 and by 63.8% compared to 2019.
So where have all the cars gone?
“Demand hasn’t increased, it’s always been the same,” said Chris Lawlor, owner of Lawlor Motors, based in Dublin’s Park West borough.
“The fact is that if a cog in the supply chain breaks for a certain period of time, then there is a backlog. The same demand is there, but there is this bottleneck.
“I’ve heard of dealers now a year later calling customers and asking them if they want to sell them the car back for the same price. That creates a backlog and a lot of catching up to do.”
The cog in the supply chain identified by Mr. Lawlor is the global shortage of semiconductor chips, which are essential for automobile production. And while these chips are needed in cars, they’re also needed for a variety of devices like smartphones and gaming consoles.
The problem is global, but a drop in production from China — a giant maker of such chips — during the pandemic has impacted many industries.
Just this week, Intel chief executive Patrick Gelsinger predicted another year of “very constrained supply chains,” and shortages would continue into 2023.
Mr Lawlor said the output gap means people have to put off buying a new car while keeping the car they would then trade, allowing it to “trickle down” into the used car market.
Earlier this week, car dealers accused the government of steering the used car market to a point where prices are now 56% higher than when the pandemic began.
Ireland isn’t the only one affected, but what’s helping to push up car prices here is our reliance on the UK for used car inventories.
“We bring a lot of our stock from England,” Mr Lawlor said.
“It makes the cost of bringing stuff in general — because the prices of stuff over there have gone up anyway — it makes it less feasible.”
And Brexit is no small factor when it comes to the price of used cars in Ireland, as cars have now become much more expensive to import from the UK.
Between VAT and customs duties, the import cost increases by about 33% compared to before. When these additional import costs from a key trading partner were combined with the supply shortage caused by the semiconductor shortage, Mr. Lawlor said the “perfect storm” ensued.
“Two years ago I was selling things for the same price as now,” he said. “Let’s say a 2016 or 2017 car, I sell it two years ago for the same price as now.”
Denis Murphy, chief executive and co-owner of Cork-based Blackwater Motors, said supply shortages were contributing to the current pricing woes, but government decisions also played a role.
“We expect the supply issue to be resolved by July, but the industry has warned the government about all of this and they’ve made certain decisions anyway,” he said.
That certainly doesn’t make it easy. When I broached this topic in a friend’s WhatsApp group, the reaction of those who actually want to buy a car was a mixture of shock, frustration and confusion.
One is looking for a bigger car to accommodate his growing family.
“I prefer to look for a seven-seater from Renault,” he said.
“Lots of room in there, it doesn’t get driven much and the Renault is cheap. The plan was to get a seven or eight year old car for about 7,000 euros with the trade-in.”
He said a friend of his who lives in Belgium made a similar deal when he got one for himself.
“I’ve been to our local workshop and a few dealers, they all say the same thing, there’s no supply and what’s there is overpriced,” he said.
“Our car itself isn’t in the best condition, but even that has gone up in value. It’s now €4,500 when I thought we’d be lucky to get €2,000.
“So I’m in a quandary: risk a few months with the current car until things settle down, pay money we don’t have for a car that’s not worth it, or buy an older car that’s coming with problems of their own.”
When it comes to entry-level cars, while prices are certainly higher than before, it’s still about you getting what you pay for.
In Cork today, for example, a 2006 Toyota Yaris 1L petrol is selling for €2,300. A 2011 Renault Clio 1.2 in Carlow costs 3,600 euros. A 2013 Peugeot 017 1.6 Diesel costs €4,900 in Tipperary.
To get it under the 2,000 euro mark, we’re talking about cars that are at least 12-13 years old.
If it’s the family car and you’re looking for extra space, a dealership in Cork is selling a 2015 Opel Zafira 2L 7 seater for €12,400. A Mazda5 from 2015 is sold for 14,995 euros.
In Limerick you can snag a 2014 Ford Galaxy 2.0 for €8,495 while a 2014 Kia Carens is available in Galway for €9,950.
So even with the trade-in option, you’re spending a reasonable amount on the new family car.
Looking at some of the more expensive models, a 2018 Nissan Qashqai 1.5L costs €23,490 in Cork. A 2019 Renault Kadjar costs 24,990 euros.
A 2014 BMW 4 Series 2L sells for €20,950 in Limerick while a 2015 Mercedes Benz E Class sells for €20,900 in Dublin.
And what does all this mean for the local consumer looking to buy a car?
Your euro won’t go anywhere near as far as it did before the pandemic, and that leaves buyers with a choice to stay – with the car they currently drive – or spin. For people starting out, it means they’re paying a little more to get on the road than they would have been two or three years ago.
Right now, it’s very important to either take your time and see if prices stabilize, or give it a try now.