Greetings once more. Agreeably for most, the biggest monetary commitment or investment they’re likely to make in their lifetime is purchasing a house, as those who have managed to do so can confirm. Following this, raising children typically emerges as the second most costly investment, while arranging for a future retirement plan is another key consideration for the financially prudent individuals.
However, these are all long-term financial strategies. In terms of recurring expenses that need to be considered and planned for, acquiring a vehicle is up there among the stress-inducing factors. The difficulties arise with questions like should the car be second-hand or brand new? Which make? What manufacturing year? How will the finance be organised?
What exacerbates this decision-making process is that most people only contend with it every few years. Consequently, we often find ourselves needing to quickly get up to speed on the changes in the automotive marketplace since our last purchase. New vehicle models are frequently introduced and old ones discontinued, potentially complicating support and parts availability for used cars.
Additionally, elapsing time presents the advantage of better gauging the pros, cons, and endurance of one used car model compared to another.
The process isn’t eased much by the generally negative view of car salespeople. Gallup conducts an annual survey on perceived trustworthiness and honesty of several professions. Typically, car salespeople feature at or near the end of this list, rubbing shoulders with advertising workers and politicians at a national level. Although the Gallup study is based in the US, similar findings are shown in research nearer to our location.
In practical terms, when you’re on the verge of spending notable sums of money, there’s a desire to ensure your decisions are made with full knowledge and that the vendor is equally committed to that end. This lack of trust serves to complicate the purchasing experience.
Presently, it’s not just about the vehicle in isolation. More expansive aspects such as environmental sustainability and routine logistics crop up in car buying processes. Factors like the possible guilt associated with contributing to air pollution with our petrol or diesel vehicles, availability and sufficiency of charging networks to prevent constant battery anxiety, and the feasibility of owning an electric vehicle (EV) as an apartment resident, come into play.
While I typically keep a car until it’s no longer operative, many buyers contemplate the resale value of their vehicle. With increasing taxes on fossil fuels, will there be a market for fuel-intensive vehicles in three to five years? Will the advancements in today’s electric vehicles render our cars obsolete, depreciating the second-hand value?
The choice between buying a brand new or second-hand car used to be simple. A new vehicle generally boasted better environmental credentials, superior reliability (complimented by a robust warranty for peace of mind), cutting-edge technologies, and the possibility of personal customisations. It also offered a safety net, eliminating worries associated with the impact of previous drivers on the longevity of key components like the clutch, or hidden faults due to the vehicle’s service or accident records.
However, a new car was typically costlier and depreciated in value quicker than a used car. The pre-owned car market came with its own advantages, notably lower costs, albeit potentially with unexpected repair bills. The model would usually have an established performance record, enabling purchasers to recognise common issues with specific makes and models. Also, it generally maintained its reduced value better.
But, certain circumstances, particularly Brexit and the pandemic, have considerably complicated this cost debate for motorists in Ireland. Car dealerships and individuals previously imported many used cars from the UK into the Irish market due to a larger market size and generally lower prices. These cost benefits were then passed on to the consumers. However, Brexit impacted this trend, making it pricier to import and re-register those vehicles due to changes in VAT and import duties. Consequently, there’s been a significant reduction in used cars imports from the UK into Ireland.
The Covid-19 pandemic exacerbated supply chain issues, severely affecting the availability of computer chips vital for modern cars’ operation. With less availability of chips, fewer cars were produced. Consequently, individuals were compelled to stick with their existing vehicles for a longer duration as they were unable to replace them with newer models, leading to scarcity in the used car marketplace.
Furthermore, the global pandemic induced lockdowns, which wreaked havoc on the vehicle rental industry as tourism dwindled. Consequently, businesses halted their fleet purchase. Under usual circumstances, these rental vehicles get pushed into the second-hand market every year, but this process was abruptly interrupted for several years.
This scarcity of used vehicles led to a drastic increase in their prices, making it difficult to find affordable used cars. In fact, the last time I was looking to buy a car, I felt it was more cost-effective to purchase a new one due to the soaring prices of used vehicles.
Nevertheless, the situation has shown slight improvements recently. According to Done Deal’s half-year motor report, the annual inflation rate for used petrol and diesel cars fell to 4.9 per cent in the second quarter of the year, the lowest since 2019. This figure dropped from 9 per cent at the end of last year and an average of over 21 per cent annually for the previous three years.
Tom Gillespie, who conducts the economic analysis for the sector, attributes this change to better supply. New vehicle sales slightly increased, about 1.8 per cent, leading to more trade-ins, and used imports have surged by a quarter, although they’re still less than half of 2019 levels.
Based on Done Deal site’s viewing data, Gillespie revealed a 15 per cent increase in the demand for second-hand cars in the first half of the year, with a 19 per cent stronger supply. This trend resulted in a 0.2 per cent drop in prices in the second quarter, compared to a 2 per cent hike in the first quarter.
The pre-owned electric vehicle market has seen a notable decrease in price, accelerated by several factors. An upswing in supply, fueled by early adopters trading up to the latest models, is one. The devaluation of new electric vehicles (EV) is another, as is a not fully-converted market still skeptical about EV charging infrastructures and battery lifespan.
Resale platform, Done Deal, indicates that despite this dip, 2023’s year-end prices for used cars remained considerably higher, by about 85%, than those of early 2020. This is a sharp contrast to the broader European market’s modest increase of a bit over 16%, as reported by the Germany-based Auto1 group.
The Central Statistics Office shows that the cost of purchasing a car in Ireland had a slight 1.4% rise over the 12 months leading to September, yet it was still costlier by 29% than pre-pandemic end-of-year prices in 2019. This outpaces the overall inflation rate of the consumer price index, which was measured at 19% during the same period.
Choosing between a new and a used car always comes down to individual choice. But anyone veering towards the pre-owned route must be cognizant of the fact that adequate understanding of cars – or acquaintance with someone who has it – can make a world of difference. There is a fair argument to be made for opting for a dealer rather than a private seller.
Though personal sellers may offer more competitive prices due to the lack of overheads businesses incur, it might turn out to be a bad bargain. Purchasing from a dealership usually provides the security of a warranty and the reassurance of support in the eventuality something goes awry.