Second hand car prices falling as interest rates rise

For the past 12 months, used car prices have been surging and now there’s a warning about when people should think about buying.

Second hand vehicle prices have fallen for four consecutive months, with predictions of further drops for the remainder of the year due in part to rising interest rates.

From August to September, prices declined on average 1.1 per cent, according to Moody’s Analytics associate economist Catarina Noro.

But September marked a slowdown in month-to-month declines and an acceleration in year-over-year growth.

It was driven by both passenger cars, and light trucks and SUVs, Ms Noro said.

From August to September, prices fell on average 1.1 per cent. Picture: Daily Telegraph/Monique Harmer

It comes following an increase in supply of new vehicles as a semiconductor shortage, which impacted production rates, begins to ease.

If demand wanes due to rising interest rates, used vehicle prices could go down more steeply, Moody’s Analytics added.

Meanwhile, the CommBank household spending intentions index fell 0.5 per cent, down to 114.9 in September from 115.5 a month earlier.

It was the first monthly decline since the RBA began hiking interest rates this year.

Motor vehicle spending climbed six per cent in September, following a 14 per cent gain in August.

Spending on motor vehicles is now up 3.3 per cent for the year, moving into positive territory for the first time since March.

Motor vehicle spending climbed six per cent in September, following a 14 per cent gain in August. Picture: Daily Telegraph/Monique Harmer

“The gains in the motor vehicle index provides some relief for the industry, as global supply chain issues begin to resolve,” CommBank chief economist Stephen Halmarick said.

“The improvement follows the strength seen in August, with additional deliveries of vehicles coming into Australia.

“Meanwhile, transport spending has reduced, yet we can expect an increase in the coming months as petrol prices rise as the governments excise levy returns to its full amount.”

CBA is forecasting a further 0.25 per cent rise at the RBA’s November board meeting, before a hold to assess the lagged impact.