Forget Cash In The Attic - There’s Cash On Your Driveway!

19 July 2021

Just this week, the ONS has announced that the inflation rate for used cars hit 4.4% in June. However, industry sources suggest this price hike could be even higher. But what is causing the price of used cars to soar in 2021 and how long can we expect this increase to last? Read on to learn more about the climbing prices of used cars in 2021.

Increased demand and used car shortages push prices up

The current used car price increase is a result of a surge in demand, combined with a shortage of both new and used vehicles. Let’s take a look at exactly what has caused this current spike in used car prices.

1. Lockdown-enforced production shortages

When the UK was plunged into its first national lockdown in March 2020, the production of new vehicles ground quickly to a halt. For many manufacturers, this pause on production lasted for several months, with no new cars being sold for a large proportion of the summer.

It isn’t just the UK that noticed a drop in the production of new vehicles, either. According to Statista, the number of new cars manufactured globally in 2020 fell to just 78 million, a decrease of 15% when compared to 2019’s figures.

This has left a huge shortage in used cars, with 20 plate vehicles rarely appearing on the used car market as a result.

2. Semi-conductor crisis in the new car market

Microchips are a key component of modern day cars, controlling everything from the airbags and braking sensors to the power steering and entertainment system. Without microchips, manufacturers are unable to build new cars.

When the first lockdown struck in March 2020, production of new vehicles ground to a halt almost overnight. At the same time, many workers were placed on furlough and schools were closed, leading to a soar in the demand for tablets, games consoles and other electronic devices.

As a result, the manufacturers of these chips diverted their stocks to the consumer electronics market. However, there simply weren’t enough chips to meet the increased demand, leaving the semiconductor industry facing a worldwide shortage.

As production of new vehicles has begun to ramp back up, car manufacturers have been left concerned about the lack of microchips available. This has had a significant impact on the production of new vehicles, with many manufacturers having to reduce production as a result.

With fewer new cars on the market, motorists in need of new wheels have been forced to turn to the used car market, depleting stocks of used vehicles.

3. Alternative to public transport

In a bid to keep themselves safe during the pandemic, many commuters moved away from public transport and turned instead towards the safety of their cars. Although many commuters have returned to public transport, there are also many who now feel happier behind the wheel and are continuing to drive to work instead of utilising public transport.

This has placed a higher demand on used vehicles, with many people buying a second family car or upgrading their existing car to a more economic vehicle for commuting.

4. Forced savings during lockdown

During the pandemic, many people have built up ‘forced savings’ – money that they wouldn’t have saved otherwise. In fact, it is estimated that up to £200 billion has been saved by people who were unable to go out or holiday during the Covid-19 pandemic.

As a result of these forced savings, many motorists are now looking to upgrade their vehicle to a newer model. This is putting increased demand on the used car market, as vehicles are snapped up almost as quickly as they are advertised, pushing prices up.

The future of used cars

There’s no telling how long this surge in prices will last, but experts expect that as the effects of the pandemic lessen, as public transport gets back to normal and as new car production settles down, prices will begin to return to normal. However, this is unlikely to happen for at least the next few months.

One thing is for certain, however – the price of used cars has never been better, making this the ideal time to sell your old car. There really could be cash sitting on your driveway, right now.

If you’re thinking about selling your old car, contact Any Colour Car today.

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