Used cars: This is how long the shortage will last

Used cars: This is how long the shortage will last

Every economist knows the basic formula of a market economy: supply and demand determine the price. So far, so known. Since the financial crisis of 2008, neoliberal economic principles have been increasingly questioned because “the market” sometimes reacts unpredictably. Much to the annoyance of the monetary authorities, whose low interest rate policy triggered a flood of money, which is now resulting in an inflation explosion that is difficult to get under control due to the pandemic and the war in Ukraine. Bad news: The World Bank and Co. don't have much left in their kitty. In short: we are threatened with evil. What does this have to do with the domestic used car market? Well, it works exactly the way economists and business economists explain it in the textbook: If demand is high and supply is low, then the price rises. With the effect that the GW market has climbed to an all-time high in the past two years. Reason to celebrate? Depending on which side you are on. 

Alexander Scheinwender, Managing Director of DAT Austria, summarizes the situation as follows: "We are observing two trends: Firstly, the number of used vehicles traded in 2022 is stable at around 65,000 units per month, but 9.3 percent below the comparable period in 2021 - according to Statistics Austria. Secondly, the prices of used vehicles are increasing by up to 12 percent compared to the previous year, depending on age and segment. Based on our research, the prices of used vehicles are increasing by up to 12 percent compared to the previous year. Based on our research, there is one average increase of 3.9 percent.

The main cause of both trends is the long delivery times for new vehicles, the uncertainty among consumers about the near future and the associated longer holding times for used vehicles.” Anyone who speaks to larger traders will quickly hear: “The market has been sold short.” Because not only has the private car market become manageable, the large fleet and leasing returns are also hard to get hold of.

The problem: Neither rental car companies nor large company fleets receive the new cars they ordered, but employees still need a set of wheels. It's a delicate matter for fleet managers: on the one hand, his used car fleet has never been worth more, but on the other hand, it's of no use to him because if he were to turn the fleet into money, there would be no real alternatives. It has to continue to be driven, maintained and repaired and the GW market remains meager in terms of supply. 
 

Private car ownership is currently the most profitable. The average car value is at an all-time high and even niche models or older devices find dealers willing to trade them in. Michael Gawanda, Head of Auto & Motor at willhaben.at, says: “We are currently observing a unique development” (more in the interview on page 14). At Auto1.com (the company behind wirkaufendeinauto.at and Autohero), growth continues briskly: In the first quarter of 2022, the group was able to sell a total of 169,610 cars - around 30 percent more compared to the previous year.

But what's much more interesting is that sales revenue per unit also increased by over 30 percent. A clear indication that marketing prices have risen significantly. Exciting, if only a side note: According to Auto1.com, car dealers' interest in trading used electric cars is now increasing. In other words: Retailers are now sensing – and preparing for – the first electric vehicles coming onto the farm. Alexander Vysek, Head of Sales at AutoScout24.at and Nebenwagen.at, also confirmed this in an interview with KFZwirtschaft in the May issue: “The used electric car market is literally exploding: from February to March 2022 it was 48 percent more.” He primarily sees the high fuel prices as the driving force behind this.
 

Vysek doesn't want to commit. He believes that prices can still rise somewhat, although not at the same pace as before. An easing of tensions is only in sight when the supply of new cars increases again due to manufacturers' better ability to deliver new cars. Alexander Steinwender from DAT Austria is more specific: “Based on our data and the current facts, however, we see a slowdown in the price increase and thus a plateau has been reached.”

If automotive industry analysts are to be believed, the shortage of new cars will last until the beginning of 2024. Until then, you have to be prepared for a tight and high-priced GW market. Because as you can see: the used car market strictly follows the market logic of supply and demand.