Asking prices for used cars rose 29% in the year to the end of June, new research from DoneDeal has found.
According to the listings website, prices being sought for cars are now 63.7% higher than they were before the Covid-19 pandemic began.
The rapidly rising costs are being driven by an ongoing supply demand imbalance, caused by Brexit, shortages in global car components that are hitting new car supplies and a boost in demand driven by household savings accumulated during the pandemic.
The consequence has been an average 5.9% increase in asking prices for used cars every quarter over the two years that Covid-19 has been around.
This compared to average quarterly increases of 0.8% in the two year period before the pandemic began.
However, Dr Tom Gillespie, who compiles the data for the website, said that inflation in the wider economy along with increasing interest rates are having an effect on reducing demand.
“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,” he said.
“On the supply side, although the deficit for new cars is still very acute when compared to pre-pandemic levels…year-on-year it is up slightly at 2.1% for the first 6 months.”
Dr Gillespie said with used car imports down a third so far this year, a new balance is being reached between supply and demand that has moderated the used car inflation rate to 3.9% in the period between April and June.
The asking prices for used hybrid cars rose 2.8% in the second quarter, compared to 6.6% for electric vehicles.
“Although price increases are slowing down for more expensive combustion engine cars, EVs and hybrids (both accounting for 12.5% of cars in the upper end of the market), which are generally positioned in that price range, are still experiencing unwavering price growth,” Dr Gillespie said.
The data also shows that the rate of asking price inflation is still higher at the lower end of the market with prices sought for cars worth €6,000 or less running at 7.3% during the second three months of the year.
This increased inflation rate is being caused by cars bought new in the Celtic Tiger years becoming obsolete and reduced UK used car imports.
It means that prices for those cheaper cars are now 96.9% higher than just before the pandemic.
In comparison at the other end of the market quarterly inflation for cars worth more than €19,000 has slowed to 1.5% in the second quarter, down from a quarterly average of 4.5% in the past two years.
“For a cohort of the population who can’t afford cleaner and more expensive cars, there will always be a necessity for cheaper cars,” claimed Dr Gillespie.
“It is therefore likely that prices in the lower end of the market will continue to rise until cheaper car prices in the UK, plus tariffs, are competitive with the equilibrium level of prices in Ireland.”
“From an emissions reduction perspective, this is problematic, as older cars generally emit considerably greater levels of CO2 and harmful particulates.”