As FT Alphaville Reported last week, Used cars around the world are experiencing unprecedented price increases.

We recently spoke with Derren Martin of Cap HPI, a UK-based market valuation expert, to discuss the factors that led to the stock shortage behind the price increase.

According to Martin, the UK market has been experiencing a perfect storm of challenges between supply and demand. He said that on the demand side, the large returns from buyers who postpone their purchases until after the lock-in period and those who now want to use Covid savings to upgrade their cars have hit this demand.

On the supply side, due to the shortage of semiconductors in Taiwan, the prolonged waiting time for new cars put the market under pressure. However, as Martin added, due to the reduction in the number of new car registrations in 2020 and the reduction in the escape of leasing companies, there is also a general shortage of inventory in the system.

However, what really caught our attention was the following chart in Cap HPI’s latest automotive market overview:

Yes, in a market that is usually based on depreciation, prices are expected to rise by 6.7% in May (as pointed out confusingly under the June heading). In terms of background, the biggest increase in the previous month of this year was the 1% increase in February 2018.

In nominal terms, the price of each car is approximately £825, reflecting approximately three years of inventory.

So far this year, the percentage growth of one-year old cars has not reached the exact same level. In May, it increased by 5.6% month-on-month, but due to the increase in overall value, its average nominal price reached around 1200 pounds. .

Martin also told us that buyers did not discriminate against diesel vehicles because the upcoming environmental restrictions may arouse expectations. In fact, although hybrid vehicles are also recovering, traditional fuel types (gasoline and diesel) tend to outperform electric vehicles.

Note from the HPI upper limit:

Traditional gasoline and diesel fuel types continue to prove to be the most popular, with the largest average increases (7.2% and 6.4%, respectively), but hybrid and plug-in hybrid vehicles are also beginning to recover. Some of the hybrids whose prices were hit hardest last year, such as the Toyota Auris, Prius and Prius+, all saw their 5-year price increases in March by 13%, 9% and 8%, equivalent to 1,100 pounds, respectively. 950 pounds and 1,000 pounds.

It seems that there are few differences between manufacturers:

Ford Fiesta (Ford Fiesta) grew by 8.5% and exceeded £1,000 at 1 year old, and Audi A3 was above 7% (£1,300 for 1 year old and £800 for 3 years old). These examples come from various brands and industries), Vauxhall Vauxhall Zafira (Vauxhall Zafira) increased by 10.4% (approximately 750 pounds in 3 years), Mazda 6 increased by 8.1% (approximately 700 pounds in 3 years), BMW X3 increased by 3 years (approximately 1,500 years) and 6.2% Volkswagen Tiguan gasoline is up 10% or £2,400 at the 1-year point.

Given market behavior, some people wonder why retail prices are much slower to catch up with price trends than wholesale prices.

According to HPI, this may be due to the slow pace of dealers passing price increases to customers. However, this may soon change:

Since many shops are still selling the cars they bought a few weeks ago, not everyone has increased the advertised price of cars as demand for cars grows. It took some time for many people to realize that they could push up the price and it was impossible to replace the sold product with a price similar to the price they paid.

There are even reports that dealers buy from other cheaper retail channels because the price of the car is lower than the price of the wholesale car at the time. Many dealers are also doing their best to be competitive in the part of the exchange price they pay, realizing that there are retail opportunities, and buying cars from private individuals on retail websites, and even calling customers. They have sold cars before and proposed To buy back cars, sometimes the price is higher than the purchase price.

One thing is certain: this is an extraordinary moment in the market.

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