You might have heard us talking about it before, but the new and used car market is in a bit of a flux at the minute with new car shortages and used car prices going up.
Last year the new car market saw an ongoing shortage of models from most of the major manufacturers. This was due to a global shortage of semiconductor chips – a knock-on effect of production lines being forced to halt at the peak of the pandemic – meaning manufacturers were unable to power the mod cons we’ve come to expect with new cars such as infotainment and advanced safety systems.
Unfortunately this disruption has continued well into 2022, with predictions expecting it to be a theme for the majority of the year.
Why are used car prices so high?
Due to this disruption and long lead times on the wait for a new car, more and more motorists are turning to the used car market… and that increased demand is leading to used car prices going up. On top of that, consumer insights from Think with Google reveal that around 40% of the U.K. population uses public transport and of that group 43% indicated they will change their public transport usage in a post COVID-19 world with 1 out of 8 people indicating they would consider purchasing a car.
This has naturally led to further demand, in fact last year the number of used cars sold grew by more than 11% year-on-year (equivalent to around 7.5 million cars) according to Society of Motor Manufacturers and Traders. Compare this to new car sales (1.6 million registrations in 2021) and you understand the wide gap and how demand is exceeding supply, with used car prices going up a record 28.6 percent on a year-on-year and like-for-like basis.
So huge was 2021’s growth in used car prices, the market recorded nearly five years’ worth of growth in just six months according to Auto Trader Insights, with the average sticker price increasing circa £3,400 since May 2021.
Will used car prices drop in 2022?
As touched on above, part of the reason the used car market saw such unprecedented growth after the first lockdown was because commuters didn’t want to risk being on public transport due to the heightened risk of infection. On top of this, as a result of lockdown and travel bans, people had unintentionally made significant savings giving them increased capital to buy a car.
With the cost of living crisis now biting hard in 2022, purse strings have naturally been tightened across the country. However, while consumers are likely to become more frugal, used car stock levels aren’t going to radically change from those predicted and thus prices aren’t necessarily going to plummet. Instead, car dealers expect the used car market to remain as is with margin reducing slightly with any drop in demand.
It’s hard to predict, but industry consensus seems to be that it won’t be until 2023 before new and used car market supply and prices realign to 2019 levels of stability.
How can I get a good deal on a used car?
With used car pricing driven by a lack of supply and an unabating demand, there is essentially no reason for dealerships to offer discounts and reductions on stock as it stands.
Inevitably there will always be some deals around, for example Hippo Leasing’s current Easter special offers, but with our own pricing dictated by what we’ve paid to secure the model at trade auction and to its current Cap HPI guide cost we view our pricing as fair as it would be in any situation.
The good news is, if you have a car to trade in then its part-exchange value is likely to have increased with the market disruption too: we encourage you to get quotes to give you a guide price for how much it is worth on the current market.
Hippo Leasing’s Top 5 most popular used cars in 2021
Scroll through our most popular used cars to buy or lease in 2021 below:
Like what you see? Check our current used car stock and see what appeals to you.