The value of used-cars has increased substantially thanks to the effects of the pandemic and a scarcity of new vehicles.

The impact of Covid and a shortage of microchips have severely restricted the supply of new cars and upended the market.

This has led to the number of second-hand cars for sale drying up, meaning that they have been rising in value.

Someone who bought a used car for €5,000 before the pandemic would now be able to sell it for up to €8,500 - which, with two years' depreciation, should really be worth €3,000.

Prices are almost 70% higher, now compared to the pandemic onset in February 2020.

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Compared to this time last year, prices have increased by more than 16%.

A DoneDeal report that was released yesterday said: "Despite this, in the last three months of 2022, it seems that price inflation has finally slowed to a more 'normal' level, as the quarterly rate of price inflation in the last quarcars ter of 2022 was just 1.4%, the lowest rate of inflation seen since Q3, 2019."

At the height of the pandemic, prices were rising by around 5% every three months, which the report's author, economist Dr Tom Gillespie, said "was unheard of".

However, he added: "Now the cost-of-living issue is starting to kick in, demand is starting to wane a bit and that's causing instability in prices now.

"The problem during the pandemic was a six-month to year-long wait for a new car.

"So what did people do then? They turned to almost-new - that puts added pressure on the used-car market. That happened around the world and in used-car markets saw the first bit of inflation that happened."

He added: "The microchip shortage was a global issue and that was affecting new car production, so all used-car markets, the prices were going up during the pandemic.

"But in Ireland, we had the double effect of Brexit. So even if the pandemic hadn't have happened, we probably would have seen a spike in prices in Ireland. Because we were unable to get in cars from the UK as much, it's basically halved."

In-depth analysis of ad view trends on DoneDeal shows demand in the final three months of last year fell by 17% on the previous three-month period - largely in tune with the price inflation slowdown.

Dr Gillespie added: "The inflation is outstripping the effect of depreciation, therefore prices are going up. It's been a supply issue. We used to get all our cars in from the UK. Now, because of Brexit, you have to pay VAT and VAT has gone up for older cars."

At the upper end of the market - cars worth more than €20,000 - the final three months of last year saw a 1.1% fall in prices However, at the lower end, prices increased by 5%.

For the lower end of the market, the Celtic Tiger-era cars are becoming obsolete, and replacing the supply of older/ cheaper cars can only come from the right-hand countries such as Britain and Japan.

For many in rural Ireland, there is a strong reliance on a car for transport, therefore demand does not fluctuate much for them. Worryingly, the report added: "As prices continue to rise in the lower end of the market, cars are becoming less affordable, lower in safety standards, and higher in emissions."