Used Car Prices Boom
If you’re umming and ahhing about selling your car, now might be the time. But for how much longer?
Did you know that used car prices in Australia are hitting all-time highs? It’s true. In fact, some used vehicles are reporting a 30% pump in prices compared to mid-late 2019.
Why? We investigate.
Firstly, a little background:
Used car prices always fluctuate throughout the year in Australia. Late spring – early summer is a good time to sell. We then see a boost in early January as people rush to buy before returning to work. Early winter is often a low-price point and ideal for getting the best deals on used cars.
In recent years, Australia has become more keen on larger cars – SUVs and utes which explains why these vehicles see higher prices and faster sales.
For example, check out the most popular cars in Australia over the last few decades:
- 1985: Ford Falcon
- 1990: Holden Commodore
- 1995: Ford Falcon
- 2000: Holden Commodore
- 2005: Holden Commodore
- 2010: Holden Commodore
- 2015: Ford Ranger (here come the utes and SUVs)
In 2020, the top 3 most popular vehicles in Australia were: the Toyota HiLux followed by the Ford Ranger and Toyota RAV4 respectively. All 3 are utes / SUVs.
Which cars are seeing the most price increases?
According to financial intelligence company Moody’s, cars that are 3-5 years old are most popular.
The current average vehicle age in Australia is 9.9 years old.
Specific makes and models:
- Toyota Hilux
- Ford Ranger
- Mitsubishi Triton
- Toyota RAV4
- Isuzu D-Max
In other words, 3-5 year utes and SUVs with some off-road ability and/or passenger and cargo room from trusted and reliable brands.
Smaller cars such as the Toyota Camry, Toyota Corolla, Mazda CX-5 and Hyundai i30 are also seeing huge rises.
Although we’re given specific examples, note that almost all used vehicles are seeing a healthy price rise.
Why are used cars prices seeing rises?
COVID mainly, and there are several reasons for it – each one putting a squeeze on used car prices much to sellers’ delight and buyers’ wallet pain.
People aren’t using public transport as much: Squeeze #1
COVID put a huge fear on the use of public transport. For example, before March, 2019, an average of 15.4% of men and 14.2% of women claimed to use public transport.
Today, those figures have shrunk to around 4.9% for men and only 2.9% for women.
But it’s not just public transport. Rideshare services like Uber also reported huge declines during ‘peak COVID’ – up to 75% in some areas. Fortunately for drivers, food deliveries are way up – doubling in some areas from pre-COVID.
The result: more people buying cars to avoid public transport. That puts a demand on passenger cars too as parents prefer dropping their children off at school rather than allowing them to use public busses and trains.
Supply chains are getting disrupted: Squeeze #2
When it comes to assembling vehicles, a lot of international cooperation is needed. For example, audio equipment from China and Japan, leather from Europe and tyres from here in Australia – often shipped to another country for assembly.
For example, some of Australia’s favourites; the Ford Ranger, Toyota HiLux, Mazda BT-50 and Mitsubishi Triton – all manufactured in Thailand.
Like pretty much anything with ‘international’ as a theme, COVID has not been kind. International supply chains are severely hit by lockdowns and border closures. For example, when component factories shutdown and trucks and planes are unable to enter certain regions.
Another example, Hyundai at one time closed seven factories in South Korea which affected around 40% of their global output.
The Result: New car deliveries are significantly delayed or even cancelled. This pushes buyers who were looking at new cars to try late model used vehicles, in turn, increasing demand on the market. Used car prices again rise.
No international travel: Squeeze #3
As there are no (or very minimal) overseas holidays happening, people are finding themselves with spare money.
In other words, if you had been saving for an overseas trip and cancelled due to COVID, you might have some extra spending money.
Although most international holidays aren’t quite as much as cars (unless you really travel in style), some of the extra funds are finding their way to used cars. It’s not uncommon to hear someone saying, “well I was going to travel around Europe, but thanks to COVID, I’ve bought a car”.
WOW FACTOR: Around 20 airlines cancelled 100% of their flights in March, 2020 – something unimaginable pre-COVID. Australian international scheduled passenger traffic in November 2020 was 67,211 compared to 3.426 million in November 2019 – a decrease of 98%.
The result: More demand for lower-end used cars which, of course, pushes used car prices north.
More Domestic Travel: Squeeze #4
Finally, some good news. Australian domestic tourism is on the rise thanks in part to COVID. With state borders (hopefully more so) opening up, it’s a further boost. Those who previously planned international travel are looking more to holidays in Australia.
It makes sense too as we’re lucky enough to have some of the most stunning scenery in the world in one of the safest counties in the world.
As far as COVID goes, a recent list put Australia as the world’s 6th safest country. Germany being the safest, New Zealand in second and Colombia in at 100th.
The Result: Used car prices are squeezed further due to demand for family vehicles capable of long distance driving and some off-road ability (SUVs and utes).
Used Car Prices Recap:
If you’re looking to sell your car, now may be the time. When COVID vaccines become available and the world (hopefully) returns to ‘normal’ – international travel and borders open and lockdowns a thing of the past – will used car prices return to ‘normal’ too?
It’s likely as the squeezes listed above won’t have such an impact.
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