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Are cars getting more expensive?
The price of both new and used cars is rising steadily, but have you ever stopped to ask why? In this video, Rory looks into the factors affecting the cost and whether there's anything that can be done to stop it.
Words by: Lex Kristan
Published on 19 October 2021 | 0 min read
Here at Auto Trader, we publish something called the Retail Price Index which tracks changes to car prices. In August, we found that used car prices went up by 17.2%. That’s the third month in a row we’ve seen record price increases, but why exactly are cars getting more expensive?
Global shortages
It’s all about supply and demand. Right now, there's a global shortage of new cars being built, caused by the crises we’ve been through in recent times. Delays in the production of new cars mean that used cars are in higher demand, which is great news if you’re looking to sell your used car, but not so great if you’re looking to buy one.
Car factories have had to slow down production or even stop altogether whilst they wait for the microchips they need for modern cars to be built, and so car companies are prioritising the cars that make the most money and shelving their older models. Essentially, car companies are being forced to adopt the Ferrari business strategy – sell fewer cars than the market demands, causing customers to pay more with longer wait times.
Car factories have had to slow down production or even stop altogether whilst they wait for the microchips they need for modern cars to be built, and so car companies are prioritising the cars that make the most money and shelving their older models. Essentially, car companies are being forced to adopt the Ferrari business strategy – sell fewer cars than the market demands, causing customers to pay more with longer wait times.
Other factors increasing car prices
Europe can be a difficult place to do business in. With new technology comes new legislation, so legislation is being updated all the time and it becomes tougher to price cars profitably.
New cars must pass even tougher crash tests, come fitted with on-board sim cards to make emergency calls and from next year they even have to come standard fitted with cameras to read speed limit signs with the aim of slowing you down. The rising costs associated with new automotive legislation leads to a rise throughout the whole industry. The rise of electric cars has automatically bumped up the price of new cars too. Electric car batteries aren’t cheap and unfortunately at the moment the UK isn’t doing a whole lot to reduce the bill with incentives, unless you’re a company car driver. Let’s also not forget that cut-throat competition amongst brands played a huge role in keeping prices incredibly low over the years. Take a brand new Golf R for example – once upon a time you could lease one for £200 a month.
New cars must pass even tougher crash tests, come fitted with on-board sim cards to make emergency calls and from next year they even have to come standard fitted with cameras to read speed limit signs with the aim of slowing you down. The rising costs associated with new automotive legislation leads to a rise throughout the whole industry. The rise of electric cars has automatically bumped up the price of new cars too. Electric car batteries aren’t cheap and unfortunately at the moment the UK isn’t doing a whole lot to reduce the bill with incentives, unless you’re a company car driver. Let’s also not forget that cut-throat competition amongst brands played a huge role in keeping prices incredibly low over the years. Take a brand new Golf R for example – once upon a time you could lease one for £200 a month.
Will car prices drop?
As the lingering side-effects of the Pandemic wear off, we’re expecting the shortage in microchips and other materials to be tackled, so we’re surely going to see an increase in production.
Only time will tell, but as always, AutoTrader is here to help you find the right deal for you. Our price indicator is a quick and easy way to compare prices of cars against similar ones on the market, and our price rating is based on how the seller’s asking price compares to our AutoTrader valuation, so you can be sure you’re getting the most out of your money. So what future is in store for the automotive industry? Check out our YouTube channel and sound off in the comments.
Only time will tell, but as always, AutoTrader is here to help you find the right deal for you. Our price indicator is a quick and easy way to compare prices of cars against similar ones on the market, and our price rating is based on how the seller’s asking price compares to our AutoTrader valuation, so you can be sure you’re getting the most out of your money. So what future is in store for the automotive industry? Check out our YouTube channel and sound off in the comments.