How we are living in the UK is in a state of flux. The events of the last two years are continuing to have an impact on just about every industry – and motoring is still feeling the effects.
With the rising costs of fuel and reduced levels of car production making the headlines, it’s easy to see even from a brief glance that things aren’t where they once were. So, what’s next for motoring? Where are we heading?
UK average car price increase
Everything is going up in price. New cars have always been costly compared to their second-hand counterparts, but we’re seeing prices soaring for the latest models.
Our instinctive reaction to that would usually be to go and investigate the used car market These models have always been a great option as their age and depreciation levels make them affordable, especially if you bag a bargain that’s two years old and nearly new.
However, used cars are also going up in price in line with everything else. Some models are seeing bigger leaps in price than others though, so it’s worth taking a look around your local forecourt to see if it’s a case of a £500 or £5,000 difference.
Supply and demand issues
One of the main reasons why car prices are rising is because of supply chain issues. One part, in particular, that’s impacted the industry is a computer chip. Largely down to the impact of covid on the workforce, there’s a global shortage of these semiconductors that are crucial for everything from infotainment screens to fuel management.
Luxury vehicles are especially reliant on these chips as advanced trims will have high tech safety systems, parking sensors, and other driver assistance features.
Without parts like these, car production is grinding to a halt. This is slowing things down and making existing cars more valuable – and therefore more expensive.
Inflation and decreased purchasing power
Of course, another major contributing factor is inflation. The best economics books will explain why. Inflation levels have risen significantly recently. In autumn 2021, the Bank of England announced that it could rise to 5% – over double the target rate of 2%. By February 2022, it was at 7%.
This rise is hitting every area of our lives. And it seems that we’re looking at ways to make sure we’re not overspending on our motors, as seen in March when new car sales fell by 14% year on year.
Ultimately, we’re losing our purchasing power and until the economy rights itself, the auto industry will continue to be just another sector that’s feeling the fallout the last 24 months.