Used cars are becoming increasingly cheaper as waiting times for new cars become shorter
The Australian new car market has Record books rewritten in three of the last four months, as long-overdue shipments begin rolling off ships and into customers’ driveways.
This is tied to a marked location Increase in used car inventory on dealer lots, which is likely to put more downward pressure on prices.
According to vehicle data and remarketing company Cox Automotive Australia, the number of used and demo vehicle listings at dealers in its database has increased by more than 30 percent so far in 2023 and 22.5 percent compared to the same point in 2023 .
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Cox Automotive’s data isn’t the only information pointing to a decline in prices in the used market. Financial intelligence company Moody’s Analytics Recently reported total used car prices are 2.2 percent lower than in July and 11.3 percent lower than a year ago.
The company noted that used car prices are also 15.2 percent below their peak in May 2022, but still 49 percent above pre-COVID levels in August 2019.
The pattern suggests more private buyers and fleets are taking delivery of their overdue vehicles and trading in or wholesale older inventory looking for a next owner on the used market.
The Cox Automotive Price Index, which tracks used vehicle price changes over time, was at 141.1 points as of Aug. 31. That means the average price of used cars is 41.1 percent higher than the “base period” of December 2019 – just before COVID changed the market.
Although still inflated, this index is down around 5 percent from its peak in August 2022 and down 4.2 percent this year. The same data also shows that more than 40 percent of sellers have reduced the price of an advertised used car at least once, by an average of 7.1 percent.
Another thing the data shows us is that later model or newer used vehicles are selling at relatively less inflated prices than older vehicles, the supply and demand of which remains lower as more and more people do so due to increasing cost of living pressures to tighten the belt .
Used SUVs less than two years old are on average 19.7 percent more expensive than the same vehicle types just before COVID (119.7 in the price index), while SUVs 2 to 4 years old are still 31.1 percent more expensive than pre-COVID, children ages 5 to 7 are 35.1 percent more expensive and children ages 8 to 10 are, on average, 40.3 percent more expensive.
The same patterns can also be seen with cars and pickups: the older the vehicle, the higher its price index. The better value for money can be found in newer used car models where there is more supply and less demand.
The same data from Cox Automotive Australia, while not as publicly available, also relates to the company’s wholesale auctions in Manheim, where many former corporate, government and rental fleet vehicles are sold to dealers who use them to populate their used car lots.
Manheim said it recorded volume growth of 15.6 percent in August compared to July and 29.4 percent year-on-year, marking its best result since March 2021. The wholesale price index has fallen 12.7 percent from its peak in May 2022.
While wholesale prices for used cars remain high, they are falling, meaning dealers should in turn charge less for them.
For used electric vehicles, resale value remains an issue due to a number of factors, including buyer skepticism about battery condition, government rebates and tax breaks focused on new vehicles, and early adopters’ preference for the latest technology in a rapidly evolving market Segment.
The sample size of used electric vehicles remains small because demand on the new side only skyrocketed in 2021 and these vehicles have not yet penetrated the used market on a large scale. Only 0.5 percent of dealer-used offerings in Cox Automotive data are electric vehicles, or PHEVs.
MORE: Used car prices continue to fall in AustraliaMORE: Why prices for used electric cars are falling faster
