Used car prices drop as new cars become more expensive

Australians have bought a record number of new cars this year, despite big price rises. But buyers are being hit by a dip in resale values.

It is becoming harder for Australians to upgrade to a new car, new figures show.

Figures released by the Australian Automotive Dealer Association (AADA) reveal that used car prices have fallen dramatically in recent months, while new cars have become more expensive, widening the gap between the value of a trade-in and a new car.

Used cars are also taking longer to sell, an indication that sellers are asking too much and buyers are looking to talk down the price.

AADA chief executive James Voortman said continuing strong demand for popular new cars such as the Ford Ranger and Toyota HiLux had kept prices high.

“There’s still a lot of deliveries that have to be fulfilled and customers are paying full price. If the used vehicle they have isn’t worth as much as it was 12 months ago, then the changeover cost is going to be a bit higher,” Mr Voortman said.

James Voortman, CEO of the Australian Automotive Dealers Association, says the car market was slowing. Picture: Jamila Toderas

According to the Automotive Insights Report, a joint report from the Australian Automotive Dealer Association and AutoGrab, the average price of a new passenger car has increased from $30,481 in 2022 to $35,732, while the price of an SUV has jumped from $42,212 to $44,210. Utes have experienced the biggest jump, from $58,116 to $63,748.

The report shows that the average used car is taking 52 days to sell, which is the highest it has been over the past 12 months. In March, it was only 40 days.

“After a number of years of tight supply, Australia’s used car market is seeing increased levels of stock,” Mr Voortman said.

But although used car values were dropping, several makes and models were holding their value. Some are even selling for more second-hand than they did new.

Used car stock is increasing and cars are taking longer to sell. Picture: Thomas Wielecki.

“Depending on what vehicle you hold, you might be sitting on something that retains its value really well and in some cases even exceeds the value you paid for it,” he said.

They tended to be models that were in great demand and short supply as new cars, such as the Suzuki Jimny, Toyota Yaris Cross and Toyota RAV4.

Less popular models, including wagons, sedans and some SUVs, were dropping value more quickly, as were cars from less popular brands.

Australians are on track to buy an all-time record number of new cars in 2023, but Voortman said there were signs that the strong sales were merely catching up on two years of pent-up demand.

Some vehicles, such as the Toyota Yaris Cross GX, are retaining their value. Picture: Supplied.

“A lot of vehicles being delivered today were ordered many months ago and they don’t reflect foot traffic at the dealership today. When you talk to dealers, there are less people fronting up to the showroom. The interest rates are certainly starting to bite for many Australians,” Mr Voortman said.

“So I think we’re back into a period where, depending on what vehicle you want, you can get a discount”.

But there could be light at the end of the tunnel, as improving supply of new cars has led to the return of traditional drive-away pricing and discounts on less popular models.

General manager of Red Book Global, Ross Booth. Picture: Supplied.

Car value bible Red Book’s general manager Ross Booth said that as new-car supply returned to normal and demand dipped, discounts were reappearing.

“What happened during Covid was there was no new-car supply and the transaction price for new cars increased considerably,” Mr Booth said.

“Dealers weren’t discounting cars because they didn’t have to. There weren’t enough of them.

“The supply situation is normalising and the transaction price has decreased.”