Are Car Prices Expected to Continue to Rise?
For those that have been planning on purchasing a new or used car recently, you might have had a nasty shock when looking at the current prices. The cost of both new and used cars has skyrocketed in recent times due to a number of factors, so does this show any sign of slowing down any time soon? In turbulent times like these, it is hard to predict, but there is some information that could help.
At the end of 2021, one car finance chief predicted that used car prices will plummet in 2022 from a market correction. It is thought that demand could stall in 2022 due to changes in supply levels, soaring fuel costs, the rising cost of living and economic uncertainty and this could bring down the costs. If you’re looking at a new or used car, the prices have continued to climb throughout the last two years but the insurance has stayed relatively steady.
No Change Yet
Despite this, there has been no sign of prices slowing down so far in 2022. Many experts predict car values will remain buoyant as a result of supply and demand issues and this could be a problem beyond 2022 as the lack of new cars now means that there will be fewer used cars available in the coming years.
Supply & Demand
At its core, the reason behind such high prices for both new and used cars is the global chip shortage. The chip shortage stemmed from COVID-19 and has meant that the production of new cars has been significantly slowed, which means that motorists are having to wait months for a new car and the costs are being driven up, especially due to pent up demand from the pandemic.
The Knock-On Effect
Consequently, people are shopping in the used car market so that they do not have to wait and to save money. This has led to a sharp rise in the cost of used cars with demand much higher than supply. Used car prices jumped by as much as 25% in 2021 and this could continue to rise with the chip shortage predicted to continue causing disruption into 2023.
It is hard to predict anything right now with so many factors influencing the automotive industry, but it looks like the cost of both new and used cars will remain high for the foreseeable future due to the basic supply and demand issue in both areas.