Car Prices Rising in the New Year... Used and New Cars Expected to Increase Together

[Asia Economy Reporter Yu Je-hoon] The trend of rising car prices, including new and used vehicles, continues into the new year. This is a result of a combination of factors such as increased waiting demand following the COVID-19 pandemic, the semiconductor supply shortage expected to ease around next year, and rising manufacturing costs. As a result, used cars are increasingly being sold at prices higher than new cars.

According to the industry on the 14th, the Manheim Used Vehicle Value Index in the United States recorded an all-time high of 236.2 last month, up 46.6% compared to the same period last year. Prices are also soaring. As of the end of November last year, the average used car price in the U.S. was $27,569, a 27% increase from the previous year.

This is not just an overseas phenomenon. In South Korea, used car prices are rising due to delays in new car deliveries, and a 'paradoxical phenomenon' has emerged where used car prices even exceed new car prices. According to a recent survey by K Car, a domestic direct-operated used car company, on the average market prices of models circulating in the domestic market, the Ioniq 5 ranked first, with prices reaching approximately 47.06 million KRW, about 5 million KRW higher than the actual new car purchase price including subsidies.

The industry views this as a result of pent-up waiting demand exploding as the COVID-19 situation stabilizes, while new car supply is delayed due to production disruptions caused by the semiconductor shortage, leading consumers who need vehicles immediately to turn to the used car market. For example, for Hyundai Motor Company and Kia, popular models currently require 13 to 14 months from order to delivery as of this month.

Consequently, new car prices are also expected to rise this year. This is due to the same reasons as the used car price increase: high demand combined with supply shortages. Recently, even the prices of key raw materials have been rising, further pushing up new car prices.

The HMG Management Research Institute also pointed out at a seminar hosted by the Korea Automobile Journalists Association (KAJA) yesterday that a phenomenon called 'Carflation' (Car + Inflation), where vehicle prices rise sharply, may occur this year. While last year saw price increases centered on used cars, this year each manufacturer is expected to significantly raise vehicle prices along with the release of updated model years.

Lee Dong-heon, Executive Director and Head of the Automotive Industry Research Office at Hyundai Motor Group's Economic and Industrial Research Center, stated, "This year, the market is expected to continue to be 'supplier-dominant,' where demand exceeds supply. The ongoing excess demand situation, combined with rising inflationary pressures in the global economy, is expected to lead to a significant increase in new car prices."

This content was produced with the assistance of AI translation services.