EconomyFinancialWhy are used cars going up in price instead...

Why are used cars going up in price instead of going down?

Alberto received an offer in August 2021, through a text message to his cell phone. The agency where he bought his preowned vehicle a couple of months ago offered to buy back his 2018 Honda City for 200,805 pesos. So he let it go. But last July he received a new offer from the same dealer. It was better: 240,000 pesos.

The fact that they have offered him almost 40,000 pesos more for his car is due to the fact that the lack of new units has not only stopped the natural depreciation of used cars, but has even increased their value. The consulting firm JD Power calculates that prices have risen 14.8%, on average, so far this year, however, industry specialists point out that in some models or versions the appreciation has been greater , up to 30% or more.

One of the first units that Suzuki marketed in Mexico of its Jimny model, with a price of 405,000 pesos, is now offered in the market at 1.4 million pesos, while others are offered at 600,000 pesos. This price even exceeds that of the new units, which is around 450,000 pesos, according to data provided to Expansión by the Japanese brand.

Brands and representatives of the industry highlight that the above is a consequence of the fact that consumers in the country are turning to used cars due to the scarcity of new vehicles, which could generate new business opportunities for assemblers, and even give a monetary benefit. owners for the sale of their used car.

Why are pre-owned and used cars so expensive?

The automotive sector has faced a complex global landscape since the Covid-19 pandemic began. First, due to the stoppages in the production of 2020; then due to the lack of semiconductors that has been reduced as the manufacture of electronic equipment, such as cell phones and tablets, has increased. Finally, the increase in the cost of raw materials and sea freight has raised prices considerably.

These scenarios led to the production of 9,580,911 vehicles globally throughout 2021, according to the international consulting firm IHS Markit. This reduction in supply increased the price of available units .

Eric Ramírez, regional director for LATAM at Urban Science, says in an interview that a greater revaluation has been observed in the segment of used vehicles, as consumers have turned to see these models as a mobility alternative due to the lack of recent units. output from assembly plants. This has meant that practically all models in all segments have been appreciated.

“All used vehicles are increasing: premium, cargo, commercial. All,” reiterates David Placencia, president of the National Association of New and Used Automobile and Truck Dealers.

Lucien Pinto, director of sales and marketing for Ford in Mexico, believes that the rising prices of semi-new and used units will stop when the supply levels of new vehicles normalize.

“This is happening all over the world and it is a consequence or a collateral effect of the scarcity of new vehicles, when you don’t have them you turn to see pre-owned vehicles, prices that have been increasing significantly, it is a reality ,” he adds. .

Is it a good time to sell a used car?

Horacio Chávez, General Director of KIA Mexico, foresees that the business of certified pre-owned units will close the current year with ” record figures” , with the commercialization of just over 6,000 vehicles, of which 40% will be from the firm of origin. South Korean, the rest will be units of other brands.

Financial institutions are also seeing benefits due to a greater demand for credits for the purchase of this type of model. “The advantages they see are several: they have been substantially revalued and the automotive loan continues to be the lowest delinquent portfolio of all the loans there is, so it is a great opportunity to direct efforts and pay attention,” argues Ramírez, from Urban Science.

But not only automakers, and financial institutions provide additional income from the sale of used cars. Owners can get more money for their used car, compared to a context of no scarcity and inflation.

Typically, a vehicle loses 30% of its value in the first year, and the value continues to decline over time, until it loses half of its initial value between the third and fifth years. But an owner of a Volkswagen Vento, who bought the model in 2015 for 167,000, sold it in January of this year, for 107,000 pesos. That is, with a depreciation of 35.9% after seven years.

In Alberto’s case, the depreciation of his Honda Civic has not only stopped, but even the model is now worth 20% more than it was a year ago.

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