Used car price inflation hits record levels of 56% across Ireland, including Mayo
The pandemic- and Brexit-induced shock to the market has had a staggering effect on car prices in Ireland, as highlighted in the DoneDeal Car Price Index.
Used car prices are now 56% higher than they were just before the onset of the pandemic in January 2020.
In the US, the rate of used car inflation for the same period is 47%, while in the UK it's 33%.
The persistent under-supply of semi-conductors, a crucial component in new cars, has forced manufacturers to cut back production despite the soaring consumer demand boosted by pandemic savings. This has led to increased waiting lists for new cars around the world.
Ireland was not spared from this supply/demand imbalance for new cars. In 2018/2019 there were 125,671 and 117,109 new car registrations respectively (SIMI figures), while in 2020/2021 there were 88,325 and 104,932 new car registrations respectively – a 20% drop over the two periods despite the acute increase in demand.
Longer waiting times for new cars incentivised consumers to turn to the used car market, which offered little in the way of relief as supply of used cars was also under strain.
Nowhere was this shock to used car supply felt more acutely than in Ireland, where the onset of Brexit restrictions disrupted the usual flow of used cars from our closest neighbour. In 2019, just before the onset of the pandemic and Brexit, 108,000 cars were imported from the UK; in 2020 the number was 74,900 and in 2021 it was just 47,034 – a fall of 56% from 2019 levels.
In Ireland, the deficit of UK used cars has led to a doubling of the number of imported used cars from Japan – from 3,243 in 2019 to 9,805 in 2021.
Deficit
According to DoneDeal, the deficit of used cars is in the region of 125,000 versus normal trading conditions.
In previous years, the supply of used cars in Ireland was aided by the glut of Celtic Tiger era cars. However, this aging cohort of cars are rapidly becoming obsolete, hitting the lower end of the market hardest.
This goes towards explaining the 83% rate of price inflation in cars below €3,000 observed since the pandemic. It contrasts with a more modest 30% rate of inflation in the upper end of the market (cars worth €13,000 or more) for the same period.
In the final quarter of 2021, used car prices in Ireland rose by an average of 7.7% – the second-highest quarterly price rise observed since 2011, second only to Q3 of 2021’s quarterly price increase of 10.6%. So although the increase in prices is not as sharp as the previous quarter, it is still at record levels.
Consumer demand on DoneDeal for both new and used cars from Ireland's car dealerships is also at an all-time high – up 80% on January 2020, the last ‘normal’ January for comparative purposes.
All of this this means that the price gap between new and used cars is tightening and in some cases a second-hand version of the same model is being listed for more than its new counterpart, an unprecedented situation.
Consumers looking to trade in their old cars have stronger bargaining chips as car dealers struggle to maintain their inventory.
Meanwhile, 70% of the people surveyed as part of a study accompanying the price index said they plan to buy electric within the next five years.
In Ireland, the share of electric and hybrid new car registrations is rapidly increasing. In the first half of 2019, only 2.4% of new car registrations were fully electric but in the second half of 2021 that figure has quadrupled to 10.5%. Similarly with hybrid vehicles, the share has increased from 9.4% in the first half of 2019 to 27% in the second half of 2021 (SIMI).