Used car prices soar to record highs due to COVID-19 but have they peaked?

The pandemic caused used car prices to soar as new vehicle production plunged around the world. How long can this go on?

Used car prices soared to record highs last year as Australians shunned public transport due to COVID-19 fears, with an analyst labelling the jump “incredible”.

According to the latest Datium Insights-Moody’s Analytics Price Index, prices jumped by 35 per cent by the end of December compared with where they landed at the close of 2019.

Moody’s Analytics auto economist Michael Brisson said it was a year unlike any before.

“Pushed by the COVID-19 pandemic, consumers rushed into the market at the same time supply was restricted by slow production and reduced trade-ins,” Mr Brisson said in a report on Monday.

“This incredible jump in prices is made more improbable because it happened as the nation endured numerous lockdown orders, devastating job losses, and the first recession in a generation.

“At the same time demand was heightened supply was being squeezed.

“New-vehicle production, which was shut down for weeks, has reopened in fits and starts.”

Mr Brisson said the pandemic caused people to shun public and shared transportation.

Used cars were in high demand in 2020 as Australians shunned public transport. Picture: Thomas Wielecki

The trend continues as the health crisis drags on, with Apple mobility data showing searches for public transport routes remaining 25 per cent lower than where they were towards the start of 2020.

Mr Brisson said the jump in used vehicle prices was a global phenomenon as a result of the worldwide COVID-19 recession.

Prices in the US ended the year up more than 13 per cent – the highest year-over-year gain on record.

The most popular cars across Australia remain larger vehicles, causing prices of light trucks, SUVs and utes to leap 46 per cent last year.

The latest Datium Insights’ weekly data, also released on Monday, showed prices for the Mitsubishi Outlander had the biggest surge over the past week.

The highest demand has been for light trucks, SUVs and utes.

Stock remains considerably low after global car production plunged about 23 per cent in 2020, equating to more than 15 million fewer new vehicles than what rolled off assembly lines in 2019.

Some of the supply disruptions included Jaguar Land Rover furloughing workers, Isuzu Ute suspending production after a European parts supplier shut down and Renault halting production in South Korea to better manage inventory due to the pandemic.

But for Australians in the market for a used car, the outlook is improving, with prices expected to have peaked in the December quarter.

“Demand for an additional vehicle has likely dried up, with those looking for a private ride in lieu of public transport having already purchased a vehicle,” Mr Brisson said.

“Others may be anticipating the return to public transport as plans for vaccine distribution are rolled out.”

While used car prices lifted overall by 2.7 per cent and 1.7 per cent in Datium Insights’ first two weekly readings this year, they are forecast to fall by a seasonally adjusted 3 per cent this quarter and an additional 1 per cent in the June quarter.