Used car prices rising at record rate, inflation data highlights

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Marshalls (LSE:MSLH) Motors PLC climbed to a five-year high today as the latest UK inflation figures revealed the surge in used car prices is speeding up if anything.


The car dealer has already upgraded profits estimates three times, but investors latched on to the comments in the ONS data today and sent the share price up again today.


According to the official data, used car price inflation more than doubled from 5.6% in June to 14.4% in July or the biggest rise since 2010.


Second-hand car prices have been surging, partly thanks to a shortage of new vehicles due to the shortage of semiconductor chips but also to people choosing to buy a new car rather than use public transport.


Marshall Motor raises guidance for the third time this year


Similar trends have been seen in the US, with the result that the values of car dealers have been climbing steadily.


Lookers PLC (LSE:LOOK) has almost doubled since February while Motorpoint Group PLC (LSE:MOTR, OTC:MTPTF, FRA:1X4) and Autotrader are both close to fie-year highs.


How long this tailwind can last is not clear, with suggestions already that the shortage of semiconductor chips is starting to rectify itself.


In its Global Auto Sales Monthly report, Swiss broker UBS said chip production has picked up and is expected to carry through into higher car production and sales before the end of the year.


“We think the time lag between raised output in the chip foundries and car production is currently up to 6 months,” the broker said.


“We expect a meaningful volume recovery to start in Q4 as current chip production run-rates are significantly higher than at the start of 2021.”


Shares in Marshall Motors today rose 1% to 247p, Autotrader by 1.1% to 643p though Motorpoint eased 1% to 325p.

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