Understanding the surge in used car prices
Semiconductor Chip Shortage
The primary factor contributing to the sharp increase in the price of used cars was the semiconductor chip shortage. The shortage emerged as as consequence of the COVID-19 lockdowns in 2020, disrupting the production of these vital chips. Semiconductor chips play a crucial role in modern vehicles, powering various features such as infotainment systems and safety control mechanisms. For instance, an average family car relied on approximately 40 of these chips due to the growing dependence on electronics in contemporary vehicles.
The scarcity of semiconductor chips had severely limited the production of new cars, resulting in extended waiting periods, often stretching from months to even a year, for new models. Consequently, prospective buyers eager for a new vehicle turned to the used car market, surging the demand and subsequently driving up the prices of pre-owned vehicles.
In 2023, the semiconductor shortage is still happening with demand still exceeding supply of several chip types. However the automotive industry has now adapted to a constrained supply and is much less likely to be hit by significant disruption.
Shortage in Key Materials
In addition to the chip shortage, scarcities in essential materials like aluminium, cobalt and copper had further slowed down the production of new vehicles. These materials are vital for various components of vehicles, and a deficiency in their supply has compounded the challenges face by the automotive industry, creating a ripple effect on the prices of both new and used cars.
Tips to Save Money When Purchasing a Used Vehicle
Thoroughly Compare Dealerships
Once you’ve identifies the make and model you desire, it’s essential to extensively explore different dealerships. Compare the prices and offerings for the same car across various dealerships. If you find the same car at a lower price in one dealership, inform the salesperson, and they may attempt to match or beat the deal. Smart shopping and negotiation can save you a significant amount.
Embrace the Art of Haggling
Haggling is a time-honoured skill in the world of buying vehicles. Don’t hesitate to negotiate for a discount on the vehicles or additional perks like a year’s tax or a full tank of fuel. A bit of assertiveness can go a long way in securing a better deal.
As we say in the North East ‘Shy bairns get nowt.’
Conduct a Thorough Vehicle Inspection
Before finalising the purchase, conduct a comprehensive inspection of the vehicle. Check the mileage and its history, scrutinise for any leaks (under the vehicle and the engine), assess the overall condition including bodywork, tyres and interior. Trust your instinct to ensure the vehicle is safe and likely to endure for years to come.
Establish a Realistic Budget
Determine a budget before initiating your vehicle search. Consider fuel costs, insurance, and tax in your budgeting. This prevents unexpected financial strain and ensures the total cost of ownership aligns with your financial capacity. Being financially prepared is key to a successful and affordable purchase.
On the flip side, this does mean that your current vehicle could be worth more now.
If you are considering selling your current vehicle the good news is you are likely to get more for it now than you would have a year ago. If you have a second vehicle or have found that you don’t need your vehicle anymore, now is a great time to sell.
