Australia’s used car prices drop 12 per cent amid oversupply problems

A mammoth market change has triggered the price of a used car in Australia to fall by 12 per cent over the past year as motorists tighten their budgets.

Used-car prices have fallen by almost 12 per cent since last year as the supply of new cars improves and motorists tighten their budgets in a cost-of-living crisis.

Chronic new-car supply problems over the past couple of years led to impatient buyers paying over the odds for low-kilometre used cars.

In some instances, popular used cars were selling for more than they cost new. Some experts estimated that used-car prices soared by as much as 40 per cent over pre-pandemic levels.

But supply has returned to normal in recent months and more than 110,000 new cars were delivered to customers in August, a record result for that month.

New-car supply problems over the past few years led to impatient buyers paying over the odds for low-kilometre used cars. Picture: Thomas Wielecki

Tony Weber, president of the Federal Chamber of Automotive Industries, said the result reflected “both a high level of demand from Australians and improved supply of vehicles”.

But automotive industry experts believe the result is more to do with supply than demand.

They say many of the cars delivered today were ordered months ago. In some cases, customers have been waiting for more than a year to take delivery of their new wheels.

Ross Booth, general manager of vehicle valuation service RedBook, said: “a lot of these vehicles will have been ordered previously, months ago”.

“The million-dollar question is what’s going on with demand.”

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Used car proces have dropped by more than 11 per cent in the last year, and theyre going to fall even further. Here’s why…

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Moody’s Analytics reports an average used-car price reduction of 11.6 per cent compared to the same period last year.

A report published by the service says it “expects used-vehicle prices to keep falling into next year as the supply of new vehicles into Australia builds and discretionary demand for new and used vehicles eases”.

It suggests utes and SUVs such as the Nissan Navara and Mazda CX-5 have fallen an average of 17 per cent, while passenger cars such as the Toyota Corolla have dropped by 7 per cent in the past year.

General manager of Red Book Global, Ross Booth

Federal Chamber of Automotive Industries chief executive Tony Weber.

At the same time, new-car buyers aren’t waiting as long for delivery.

Consumer advice website PriceMyCar.com.au reports that the average wait time for new cars dropped from 159 days a year ago to 81 days last month.

That represents the shortest new-vehicle wait time for more than two years.

Buyers also have a greater choice of cars.

The number of vehicles listed for sale on carsales.com.au has increased from 160,000 to 230,000 in the past 12 months, contributing to price cooling as used-car stock becomes available.

“Used cars are definitely coming down, we’re going back to where the market should be,” Mr Booth said.

“[But] new-car pricing is increasing, and it keeps the relative used price up.

“When the recommended retail price of a car goes up $10,000, it has an effect on used cars.”

Brendon Green, general manager of motor vehicles for Pickles auctions, agreed that rising prices for new cars affected the used market.

“When the used-car market normalises it will probably be 15 per cent more than what it was pre-covid, because recommended retail prices have crept up,” he said.

“People will opt for a used car in these tougher economic times, which will stop the prices from descending.”

Datium Insights reports that used-car auction clearance rates and prices are falling.

Mr Green said soft auction prices were a result of “less demand from consumers”.

“Dealers aren’t getting swamped by used-car queries,” he said.

He said high-end utes and luxury cars had dropped significantly, but that sub-$30,000 cars in good condition should hold their value in difficult economic times.

Originally published as Australia’s used car prices drop 12 per cent amid oversupply problems