Pandemic revs up used car prices – from Hyundais to Ferraris
Used car prices have rocketed – and it’s not just cheap and cheerful runabouts.
COVID-19 has fuelled a used car bonanza, from late model Hyundais to Audis, and even a Ferrari with 1200km on the clock.
Used car prices have hit a record high as the supply of new cars slows from factory shutdowns to limit the spread of coronavirus and dealers desperately search for inventory to fill their yards. It’s a trend that industry insiders expect will not to hit the brakes any time soon.
Australians have shunned public transport, with usage diving 60 per cent since January at the onset of the pandemic, and also avoiding taxis and ride sharing services. Fear of catching COVID-19 or desires to avoid fussing over strict precautions has made buying a second car more appealing, despite Australia experiencing one of its worst recessions.
While Australians have been quick to snap up a second runabout in a scarce market, the higher end of town is beginning to experience an opposite trend.
Although insolvencies have tapered off given the extraordinary support offered by the banks and the government’s temporary loosening of regulations, repossessed luxury and prestige cars are starting to hit auction floors.
Last month Pickles Auctions national prestige vehicle manager Richard Bowen sold the white-gold Rolls Royce Wraith that belonged to Michael Gu, the founder of failed property group iProsperity.
Mr Gu bought the car in mid-2018 for more than $800,000 and it went under the hammer with a little over 1000km on its odometer, selling for $502,000. It was one of the few hard assets iProsperity’s liquidator was able to realise from the company’s collapse, with Mr Gu since shifting overseas, owing investors an alleged $350m.
While cars from insolvencies have been steady, Mr Bowen said more were beginning to flow through to the auction floor and he expects the number to rise in coming months, particularly after JobKeeper tapers.
On October 12 Pickles will hold a luxury and prestige auction in Sydney where a 2015 Ferrari 458 Speciale, with 1200km on the clock, is taking top billing. Like Mr Gu’s Rolls Royce, the Ferrari — one of the marque’s last naturally aspirated V8s — is from an insolvency and is expected to fetch more than $500,000.
“We have already seen some insolvency vehicles come through our auction rooms in the form of the Rolls Royce Wraith, and the Ferrari 458 Speciale coming up in the October auction is an insolvency issue as well,” Mr Bowen said.
Another leading vehicle auction house, Manheim, has seen the price of used cars surge to its highest level since it launched its own Used Vehicle Value Index in 2006.
Manheim spokesman Mathew McAuley said average used vehicle values in Manheim’s public auctions were up 23 per cent in August compared to July, reflecting a similar pattern seen in the global financial crisis 12 years ago.
“A couple of reasons for this were the constrained supply brought on by the shuttering of new car factories and assembly lines around the world, and less vehicles making their way into the used market. We also know historically, looking at the learnings from the GFC, used car prices have risen when the sale of new cars have fallen,” Mr McAuley said.
“Demand for higher-priced used cars fell during March, April and May, while more affordable used cars continued to sell. As such, inventory levels for cheaper used vehicles have fallen compared to more expensive used vehicles, which translates into higher average sale prices.
“That being said, however, both demand for used cars and pricing has never been higher so far this year.”
Mr McAuley said as well as private customers buying cars, dealers were also keen buyers as new car inventory dwindled.
“Manheim Auctioneers have reported a much more positive sentiment since May and they are seeing dealers pick up on the rising consumer demand and participating strongly in our sales to make sure they have the inventory to take advantage of used buyers returning to the market.”
Moody’s Analytics senior economist Michael Brisson said utes were the most popular vehicles, with prices 32 per cent up on 2019, outstripping passenger vehicles, which rose 23 per cent.
“The strength of utes during the pandemic has been supported by lower petrol costs during the downturn. The decline in petrol prices can reliably predict that fuel-hungry vehicles such as trucks and utes will rise in price. This is because lower fuel costs decrease the overall cost of vehicle ownership to a greater degree for the less fuel-efficient models,” Mr Brisson said.
Australia‘s biggest agribusiness lender, NAB, has also seen ute sales rise, with its loans to the agriculture sector for equipment finance soaring 81 per cent in South Australia and Northern Territory and 37 and 27 per cent in Western Australia and NSW/ACT respectively.
Even Victoria — where stage three restrictions eased for regional areas on Wednesday night — has experienced a strong uptake in equipment finance, reporting a 41 per cent increase.
“I was in Wangaratta in between the first and second lockdown and I went and saw our customers — both in car yards and big machinery dealers as well — and they just couldn’t keep up,” NAB’s agribusiness customer executive Julie Rynski said, adding the Morrison government increasing the instant asset write-off had also buoyed sales.
“The beautiful Toyota HiLux was on backorder until October.”
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