The shortage of semiconductors is still raging on around the world. According to Car Dealer Magazine, it might even continue into next year. As many of you already know, the issue started at the beginning of 2021, and has had a huge knock-on effect by creating a shortage of new cars. As a result, the waiting lists for new cars have been growing longer by the week, pushing a lot of hopeful drivers to splash out on a used car instead.
By default, used car prices have sky-rocketed this year. And, as the shortage of chips isn’t going to lessen any time soon, we can expect the price and demand for used cars to remain pretty high.
Why is there a semiconductor chip shortage?
We’ve mentioned the semiconductor chip shortage previously, but for those who aren’t aware, here’s an overview.
When Covid hit at the beginning of last year, a lot of semiconductor manufacturers shut down temporarily (as many industries had to). However, the lockdown caused a big demand for computers, entertainment devices and the like, meaning the demand for the chips quickly surpassed the supply rate.
To top this off, Covid has caused a higher demand for used cars. Now that the UK is opening back up (as well as other parts of the world), people aren’t as willing to jump on the train or get the bus anywhere for fear of being close to others. Instead, more people want their own private transport. However, the waiting list for new cars is pretty long, which has caused plenty of hopeful drivers to turn to used cars instead.
What does this mean for used car prices?
So far, June 2021 has been the best month for used car prices, which rose 4.4% above average – a UK record. According to Bloomberg, the huge used car sales boom can be partly attributed to people having a bit of extra cash during lockdowns: savings which were ‘built up when businesses were closed during more than a year of restrictions.’
Because of the semiconductor shortage, the motor trade industry can expect the used car price boom to stick around a while longer. Speaking to the Guardian, London School of Economics Professor Alessandro Gavazza stated that ‘This is happening all over the world… The mechanism that is pushing used car prices up is the same everywhere.’
Although the supply side of things is now slowly returning to normal, there’s still a big backlog of chips to shift. According to the Guardian, it takes quite a long time to produce semiconductor chips – about three or four months, in fact. And, when you put it like that, it’s easy to see how the shortage can continue into next year.
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