New Car Production
At the onset of the covid-19 pandemic manufacturing across the globe came to an abrupt stop. Despite the market rebounding when lockdown started to ease it soon came to sharp halt as semiconductor shortages, delays and a worldwide supply chain issue caused automotive production to fall again. The semiconductor is not just causing havoc to automotive; Apple have claimed they have left $6 billion in potential sales on the table as a result of limited chip supply. The supply chain issues have been geared by an increase of global demand for electronics, a fire at fabrication unit in Japan, the freezing weather in the US and droughts in Taiwan combined with global lockdowns and temporary factory closures. One of the biggest losers to the global issue is Jaguar Landrover, they have posted loses of £302m with tens of thousands of cars lost to the ongoing issue.
Increases in used car prices
So, with new car production practically on hold, there becomes a supply and demand issue, with used car demand high largely down to the fact that many consumers couldn’t spend their disposable income during lockdown and restricted travel guidelines meant many consumers had seen prepaid travel refunded, has created somewhat of a boom for high price tag good. It still doesn’t stop there either, the car shortage has put a premium on part exchange prices, many customers have found their car is worth more than what they paid for it, for a depreciating asset that is practical unheard off, so there is been a further surge of customers have used their new found equity to part exchange their car for an upgrade.
When will the Market Normalise?
Essentially it will return to normal when the supply chain issues have been rectified, there have been rumors that it won’t fully be back to normal until 2023. Once supply starts to filter and hits dealer’s showrooms prices will start to drop but with an increase in energy & steel prices it maybe a while before the industry can offer pre-pandemic prices.
What Can Consumers Expect in 2022
It will largely depend on the bottle neck; all indications suggest that used car values will continue to rise in Q1 with some industry experts speculating it won’t return until 2023, whilst demand is high and supply is short prices will continue to rise but that’s good for consumers who have cars to trade in. It may be worth considering to change now in order to beat any bank of England rate changes which may affect the costs of borrowing for a car.
It doesn’t appear the bubble is about to burst anytime soon, if you have a car to part exchange it may be worth entering the market as it likely you will get a good return on it. If you want to consider new, then be prepared to wait as production lists are long and are nowhere near been fulfilled so it will be a case of joining the back of the queue.