Why are used cars so expensive now? We ask an expert
Cars are meant to depreciate in value as soon as you drive them off the forecourt. Yet prospective used car customers may have noticed something strange: prices are going up. I asked David Bailey, professor of business economics specialising in the automotive sector, why.
I bought my car for £1,850 in 2017. It’s currently on sale for £2,400. Has anything like this happened before? No, this is unprecedented. In some models the secondhand car can be more expensive than its brand new equivalent.
How? Because of the current microchip shortage, cars aren’t being built. So if you’ve got a car that’s nearly new, in some cases that’s worth more than being on the waiting list for six months to get it brand new.
The prices of used cars have been going up for a while, though, right? Yes. When Covid hit in 2020, car manufacturers shut down but demand was high, especially as people didn’t want to use public transport. That drove used car prices up.
As the proud owner of a no-frills car, do we really need microchips – who needs bells and whistles when you can work your biceps on a roll-up window? Modern cars have hundreds of chips in them, for everything from adjusting your seat to air conditioning. Now, carmakers are trying to take chips out because of the shortage, but it will take time. In some cases, they’re even going back to an analogue dashboard.
That’s what I have! Wow, I can’t believe my little pootler is about to become top of the range. Quite the U-turn. But won’t microchips be back to normal soon, now that Covid closures are in the rear-view mirror (sorry)? Well, that was only the initial effect. What car manufacturers have now is long Covid. So when the car industry cancelled its chip orders because it had closed, chip
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