Used cars on average have been considerably higher in price than normal as an indirect result of Covid-19. While prices were showing signs of normalising at the beginning of the year, the latest European conflict might keep them as high as 10% of the normal rate.
The supply and demand formula is quite simple: if less of a product is available to meet the needs of the public, the law of supply and demand states that more can be charged for the product to those who are willing to buy them. The Covid-19 pandemic has had long-lasting effects that have cascaded into just about every aspect of life, the automotive industry included.
Lockdowns and travel restrictions limited supply chains which are still hampering current vehicle production, most notably is that of the semiconductor which is an essential piece of technology for modern products. The less new vehicles entering the market saw buyers looking for alternative solutions.
With limited availability of new cars, prospective buyers flooded into the used car market for solutions to their transportation needs. Jamie Surkont, CEO of car-pricing experts getWorth, states: “The result was that there were more buyers chasing fewer cars. Inevitably, that pushed prices up.”
What this means is that as used cars collect more mileage and depreciate, they should lose value as they get older but the unprecedented events that have transpired over the past few years have actually seen the opposite. Surkont adds they can rise by a value as much as 10%.
After the turbulent times of the pandemic can mostly be considered behind us and manufacturers seemingly getting on top of backlogs, the used-car market was showing signs of settling back into its normal trends. The Russian invasion of Ukraine will have long term effects on new vehicle production, particularly for European based brands.
Based on what has happened in the past, Surkont adds a bleak outlook stating: “This latest supply shock might mean continued rising prices, at least in certain market segments. Add in the potential for large fuel-price hikes, and we’re in for another volatile year.”
