Used car prices rise due to trouble in the Middle East

A new report shows that after several months of decline, the value of second-hand cars is rising again. But some brands are likely to be more affected than others.

Used car prices are on the rise again. Picture: Daily Telegraph/Monique Harmer.

Used car prices have begun to climb again, delivering another blow to Australians struggling with cost of living pressures.

A report by Moody’s Analytics reveals used vehicle prices have risen for the third month in a row, reversing a downward trend last year.

It blames the price rises on shipping delays related to Houthi attacks in the Red Sea, which have forced car carriers to opt for longer routes, driving up transportation costs and delaying deliveries of European vehicles to Australia. European cars make up roughly 20 per cent of the new-car market.

Volkswagen is the most popular European brand, although Nissan also produces cars in the United Kingdom.

Shipping delays in Europe are affecting the supply of new cars from that market, although Chinese and Japanese supply is improving. Picture: AFP.

Used-car prices soared by 47 per cent after the Covid pandemic due to a shortage of computer chips that affected new-car supply.

With long waits for new cars, many buyers paid over the odds for low-kilometre, late-model used cars, driving prices up. In some cases, popular used models were fetching more than they cost new.

New-car supply improved towards the end of 2022 and throughout 2023, but has taken another hit in the first three months of this year.

The Moody’s Analytics report states March was the highest month-to-month growth in used vehicle prices since May 2022.

But it said freight issues in Europe should stabilise in coming months, relieving pressure on new car prices.

It might pay to put off that used car purchase for a couple of months. Picture: Thomas Wielecki.

It also notes that global supply of new cars is on the rise, as car makers recover from the semiconductor shortage.

Toyota has slashed the waiting time for its popular RAV4 SUV from a year to just six months and last year delivered a record number.

The report states increased vehicle production from Japan and China, our largest and third largest import markets, would also help to alleviate the situation.

And it predicts prices to fall in the remainder of the year.

Used car prices are on the rise again. Picture: Daily Telegraph/Monique Harmer.

“Despite the current uptrend, Moody’s Analytics projects a continued decline in the used-vehicle market in Australia because of the expected normalisation in supply and the negative impacts of high interest rates,” the report states.

“The decline in average market price is expected to be less steep than last year, falling an additional 8.7 per cent after having declined 9.8 per cent in 2023”.

Moody’s Analytics reveal prices are 14.8 per cent lower than their peak in May 2022, but they remain 47 per cent higher than the pre-pandemic level in February 2019.

The number of used cars for sale on vehicle classified sites has also risen dramatically since the semiconductor shortage, which bodes well for buyers.

Head of used car value bible Red Book Ross Booth said used car values would continue to come down as new-car supply improved and waitlists came down.

“There’s a lot of supply. We’re seeing discounting returning on new cars. And what we’re then seeing is that people want to buy new so they’re not buying used cars,” Mr Booth said.

“When there’s more special offers and more pressure on new-car pricing that will actually push used car prices down,” he said.

The reduced demand for used cars was reflected in the fact that they were taking more time to sell.

Originally published as Used car prices rise due to trouble in the Middle East