Opinion column – Used cars: a factor in accelerating inflation?
Inflation back in France
According to INSEE, consumer price inflation accelerated sharply in September 2021 to +2.1% year-on-year, compared with +1.9% in August and even +1.2% in July. This phenomenon had virtually disappeared over the last ten years. According to INSEE, between 2002 and 2021, inflation has only exceeded the 2% threshold on average over one year on four occasions (in 2003, 2004, 2008 and 2011). The causes of these price rises were always known, clear and external: variations in weather conditions affecting fresh food products, for example, in 2003 and 2004, or destabilisation of the geopolitical environment in the case of petroleum products in 2008 and 2011.
Rising used car prices are becoming a major factor in inflation...
Although not measured as such by INSEE, UC prices are a real and tangible factor in the rising cost of living. And it is the endogenous nature of this inflationary factor that should be the focus of our attention.
Whilst used cars have traditionally lost value month after month (from -€50 to -€200 each month, for the same vehicle – same model, same mileage, and same age), this trend is tending to slow down or even reverse. In September 2021 alone, used vehicles gained an average of €39.
It’s true that the second-hand vehicles coming onto the market are more expensive because they are, on average, better equipped and larger. But in September 2021, the average price of a used car offered for sale on the Internet was still €1,300 higher than in January 2019! A considerable gap!
... And there's no end in sight!
Although this appetite for second-hand vehicles has been confirmed in recent years, this trend has been accelerated by the Covid-19 crisis. In 2020, the used car market proved to be much more resilient to the crisis than the new car market, with sales of used cars falling by 3.5% compared with 25.5% for new cars.
This pattern will continue in 2021, with an increase of 12% over the first few months of the year compared with the same period in 2020, and even 6% compared with 2019, a year unaffected by the health crisis. Over the same period, hampered by the semiconductor crisis, registrations of new vehicles sold to private individuals are down by almost 3% compared with 2020, a year that has been hit hard by Covid19.
These falls in new vehicle sales are also synonymous with a future ratification of the used vehicle offer, whether via short-term hire (returning 12 to 24 months after their registration on the market), leasing (36 to 60 months) or via trade-ins between private individuals (between 60 and 96 months).
Given that the shortage of semi-conductors could last until 2023, we can safely assume that the shortage of used vehicles will continue for at least another 24, if not 36, months.
Faced with ever-increasing demand, we can therefore anticipate that this supply crisis will not bring used car prices down to their pre-crisis levels before at least 2024.
Given that 81% of households have at least one car, and 35% have at least two (again according to INSEE, in 2021), this phenomenon of rising prices could become a lasting catalyst for more sustained inflation over the next two to three years.
Emmanuel Labi is Managing Director of autobiz. As a European expert in Big Data for the automotive industry, autobiz draws up detailed and exhaustive reports on the various markets across the continent.
About autobiz
Since 2004, autobiz has been supporting all European players in the automotive industry with trade-in solutions. This support is based on 20 years of data history as well as web, software, and the business know-how of the company’s 280 employees. Today based in La Défense (92), autobiz also has offices in Berlin, Valencia (Spain) and Milan. autobiz assists more than 20 leaders in used remarketing (manufacturers, bankers, leasers, bidders…) as well as 5,000 points-of-sale in 22 countries across Europe.