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DoneDeal Car Price Index: Used Car Price inflation accelerates to 50%, jumping a further 10%.



The pandemic and Brexit-induced shock to the market has had a staggering effect on prices – used car prices are now nearly 50% higher than they were just before the onset of the pandemic in January 2020. In just three months since June 2021 used car prices have increased by 10.6%, the largest quarterly price inflation seen in used car prices in Ireland since the start of the DoneDeal data in 2011 - not only are prices still increasing but also the rate of increase appears to be speeding up, not slowing down.


Is your car still appreciating in value? DoneDeal's Motor Report, authored by economist Dr. Tom Gillespie, has developed a comprehensive used car price index and finds that it could be.


Topline Stats

  • According to the newly developed used car price index based on DoneDeal's uniquely large car dataset, the pandemic and Brexit-induced shock to the market has had a staggering effect on prices – used car prices are now nearly 50% higher than they were just before the onset of the pandemic in January 2020.

  • In just three months since June 2021 used car prices have increased by 10.6%, the largest quarterly price inflation seen in used car prices in Ireland since the start of the DoneDeal data in 2011 - not only are prices still increasing but also the rate of increase appears to be speeding up, not slowing down.

  • DoneDeal’s Car Price Index, modeled by TCD and NUIG economist Dr. Tom Gillespie, shows that depreciation and increased mileage is still making cars cheaper, but the overall price inflation (from decreased supply and increased demand) is eclipsing that negative effect, and therefore cars are appreciating in value for many models.

  • The number of cars required to bring prices back to ‘normal’ levels is in the region of 110,000 additional cars based on pre-pandemic levels.

  • Good news for car buyers looking for premium car brands from car Dealerships: Looking at data across cars from Car Dealerships on DoneDeal, (75% of cars for sale on DoneDeal are from car dealerships), the upper quarter of the market (cars worth €13,000 or more) is seeing a more modest quarterly inflation of 3.9%.

  • Car Price inflation appears to be much more acute at the lower end of the market where supply is constrained due to fall out of the end of life Celtic Tiger cars and Brexit reducing the number of imports. While demand is booming with pent-up covid savings, pent-up demand and people choosing to live farther away and avoid public transport.

  • The amount of consumers who intend to purchase their vehicles in cash has increased by a further 10% since our last Q2 report, making cash buyers 50% of the current car market. (Source: DoneDeal Q2 Motor Survey, n=3,000)

  • Separately to the economic analysis, we commissioned a survey of over 3,000 people. The insights are available in the full Motor Report PDF.



Used car prices showing no signs of cooling

The latest data on used car prices from DoneDeal, covering the third quarter of 2021, confirms that the market is in a truly unique period. Price inflation is on an unprecedented upward trajectory and showing no signs of slowing down. In just three months since June 2021 used car prices have increased by 10.6%, the largest quarterly price inflation seen in used car prices in Ireland since the start of the DoneDeal data in 2011. For context – the previous quarterly inflation rate in Q2, Q1, and Q4 2020 was 6.6%, 5.6% and 3.5%, respectively. So not only are prices still increasing but also the rate of increase is speeding up, not slowing down.


Choked supply due to Brexit and pandemic-induced delays on the production of new cars - coupled with increased demand from increased savings – are widely cited as causes of this abnormal price growth, and these contributing factors are showing few signs of abating in the short term. The pandemic and Brexit-induced shock to the market has had a staggering effect on prices – used car prices are now nearly 50% higher than they were just before the onset of the pandemic in February 2020.



To put this supply deficit into context we can estimate the number of cars that would be required to bring prices back to ‘normal’ levels. In 2019, the last ‘normal’ year in the used car market in Ireland, there were about 117,000 new car registrations and 114,000 used car imports, meaning a total of 231,000 extra cars in Ireland (SIMI). By comparison, there were 168,294 extra cars added to supply in 2020 and there have been 151,782 so far in 2021. A particular issue is the level of imports from the UK: these totaled 108,083 in 2019 but are currently just 40,152 so far in 2021. Based on current trends Ireland will likely see a total of 180,000 extra cars in the market in the year of 2021. These top-level statistics suggest that the deficit of cars over the last 20 months is in the region of 110,000.


Opportunities to exploit this deficit are being seized from unlikely sources. Japanese used car imports are up 65% from 3,243 in 2019 to 6,068 so far in 2021, and although they are a relatively small share in terms of total used car imports, that share has grown over 4x from 2.8% of total imports in 2019 to 12% of imports so far in 2021. Even more peculiar is that the share of used European brands imported from Japan has more than doubled from 15% of total Japanese imports in 2019 to 37% so far in 2021.

The true figure of supply deficit is likely much higher due to other sources of used car supply, not to mention accounting for increased demand from pandemic savings. A lack of tourists in 2020 meant that many hire car companies held on to their existing stock of cars, rather than release them to the used car market and replace them with new models. In a normal year, this offloading of the rental fleet equates to roughly 20,000 cars per annum (Source: Rental Car Council of Ireland). The stock of surplus Celtic-Tiger cars which have been traded in Ireland for the past 13-16 years are now becoming obsolete, thus further straining supply in the lower end of the market.


As outlined in the last DoneDeal report, the unprecedented price inflation has primarily been driven by the lower end of the market. The quarterly inflation rate for the lower quartile of the market – prices less than €3,000 – is as much as 18%. However, the upper quarter of the market (cars worth €13,000 or more) is seeing a more modest quarterly inflation of 3.9%


On the demand side, the pandemic has increased the reliance on cars. For example, people moving out of cities are necessarily more reliant on cars as public transport is less developed and operating at a reduced capacity due to restrictions.

Demand for Car rental reduced significantly when the pandemic began, forcing many car hire firms to sell off their stock sitting idle on their lots. Due to the worldwide shortage of semi-conductors, car manufacturers have been unable to expand production fast enough to meet demand from a reviving car rental business.


But perhaps the more important demand-side factor is the reallocation of income. While unemployment has scarred certain sectors and cohorts of society since March 2020, many others have seen their incomes unscathed. And with fewer options for spending – and almost no foreign travel last year – budgets for big-ticket items like a home or a car have increased. Enquiries on both new and used cars for sale on DoneDeal have increased significantly. Phone calls and emails sent to car dealers and sellers in 2021 grew by 20% vs 11% in 2019.

Methodology

Over 90% of dealer car stock is on DoneDeal. DoneDeal is the largest car marketplace in Ireland, listing 9 out of 10 cars advertised online from car dealerships in Ireland. Economist Tom Gillespie analyzed over 5m of DoneDeal’s vehicle listings from 2011-2021 using hedonic regression analysis to isolate pricing inflation associated with vehicles after controlling for mileage, age, and other vehicle attributes.


Looking for more consumer insight?

Separately to the economic analysis, we commissioned a survey of over 3,000 people. The insights are available in the full Motor Report PDF.



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