As the semi-conductor shortage worsens, pushing out new car deliveries to up to 18 months for certain models, car buyers have been flocking to the used car market.
We ourselves have noticed a shift in our customers buying behavior, with most new car buyers prioritizing availability over price.
Creating a perfect storm for used cars to soar in value, many buyers are reporting selling their used cars for more than what they paid for them initially!
Why Are Used Cars So Expensive?
Cars are comprised of around 30,000 components. Think of all the features your car has and the little parts (both internal and external) that are used to build it. These components are built in factories in one country, then shipped to a final manufacturing plant for assembly.
We mentioned the semi-conductor shortage above. These components are tiny but powerful, responsible for controlling many functions such as infotainment, mirrors, and electronics to name a few.
Supply of these chips have taken a massive blow, due to the closure of manufacturing plants as a result of the pandemic and major weather events.
Here's a full explanation of the semi-conductor shortage.
This severe decline in semi-conductor availability has caused massive delays in the wait times for new cars. Leading new-car buyers to the used car market to secure a car immediately.
As the demand for used cars increases, the supply dwindles down and pushes up the price!
How Long Will It Continue?
Every time an 'expert' makes a prediction, another event occurs pushing out the wait times all over again.
All manufacturers have made predictions and are hopeful that the semi-conductor shortage will end by the middle of this year. Manufacturing plants are currently adjusting to the new post-pandemic 'normal' and are beginning to resume production capabilities.
Countries and manufacturers have also invested heavily in their own manufacturing plants of semi-conductors to sure up their supply chains.
When accounting for shipping times to Australia and the backlog of orders, we can expect to see showrooms filling once again towards the end of 2022.
KPMG are forecasting a 30% reduction in current car prices in the US by the end of 2022.
For more information on used cars and how to drive one on a novated lease, talk to our novated leasing specialists today!