All the data is telling us that pre-owned cars are becoming waaaay more popular. The desirability of cars made in 2019 and 2021 has risen since the start of the pandemic. Are we becoming more nostalgic or is there another driving force behind this new trend towards the old?
Low supply of new cars leads to the rise of older models
The demand for used cars in South Africa has skyrocketed post COVID-19. This is primarily due to the shortage of computer chips used in the manufacturing of cars, as well as other materials such as copper and aluminium, to name a few. This scarcity has meant that there is a limited number of new cars spinning off production lines across the globe. Due to the limited availability of new cars, setting off into the sunset in the latest version of the car you’ve been dreaming about, will probably remain just a dream for most people, at least for now.
A shortage of new cars is driving up the cost of second-hand cars
Most industries are slowly but surely moving away from the new normal and are on track to getting back to their old normal. This means that more and more people are regaining their purchasing power and are putting that power to use. The trouble is that most people are not willing to wait months on end at the bottom of their favourite car manufacturer’s waiting list for the latest models. “Demand for new vehicles is now being diverted to pre-owned vehicles. Used cars manufactured in 2020 and 2019 have benefitted the most, causing an annual increase in their trade values of about 1,5%,” said Lizo Mnguni, spokesperson for Old Mutual Insure, in BusinessTech.
Soaring second-hand car prices could affect your car’s insurance policy
All your life you’ve been told the value of your car depreciates, but this new trend towards pre-owned vehicles could mean that your vehicle’s retail value has risen since the start of the pandemic.
“Today’s rocketing car market may pose a problem for your car insurance coverage in the event you have a major accident, your car is stolen, or your vehicle is damaged. Worse, you could be underinsured.” Mnguni added.
The scarcity of new vehicle models, coupled with the rising scarcity of available spare parts for older model cars, due to their surge in popularity, means your ‘depreciating’ car’s retail value may be more than what it was at the time you took out insurance. Therefore, even if your car was insured at retail value – you may just find yourself underinsured in case of a total loss or accident and you could end up paying a bigger portion of the claim from your own pocket, after you’ve paid your excess fee.
New car shortage could go on until 2023
It’s no secret, the Covid-19 pandemic has been a stress test for many industries but it’s proving to be more of a crash test for the motoring industry, grinding the manufacturing rate of new vehicles to a near halt. According to the BBC, Mercedes Group CEO Ola Källenius said the chip shortage that is disrupting global car production could continue into 2022 and even into 2023. The implication here is that we haven’t seen the last of this trend and can expect pre-owned vehicles to remain a popular choice for those who are planning to get back on the road in a new mechanical baby.
