With a strained global supply chain for new vehicles amid the COVID-19 pandemic, Australia’s used car market has seen a huge surge in prices.
The current situation
As it stands, the market is facing significant supply and demand issues across both new and used car sales. With factory closures and reduced productivity occurring in many car-manufacturing countries due to COVID-19 restrictions, the importation of new cars and car parts to Australia has taken a massive dive. The lack of new cars available for purchase turned consumer interest toward the used car market.
The first round of nation-wide lockdowns saw the Government inject massive stimulus incentives to assist Australians ahead of the financial challenges presented by the pandemic. JobKeeper and JobSeeker payments, access to up to $20 000 of super, an increase to the Instant Asset Write-Off threshold from $30 000 to $150 000, coupled with restrictions on international travel for the foreseeable future saw many Australians directing new-found cash flow towards upgrading their lifestyle and businesses with things like cars.
This fact, together with drastically diminished product availability has resulted in an over-eager consumer yet understocked market.
In the usual scheme of things, when someone wants to upgrade to a new car, they will trade in their old one. But over the course of the last 12-18 months, trends have shown that in the process of purchasing new cars, many people chosen to retain their old ones. This has caused a significant shortage of used cars available for resale.
What this means
The way second-hand cars are priced is normally determined by two main factors: mileage and condition. Other details like the age of the vehicle, its history (trade-in vs sales vehicle vs rental car), included vehicle extras, and how it compares to its brand-new counterpart are also considered. But as demand for used cars has started to outweigh the available supply, and low-age low-mileage vehicles have become harder to find, prices across the board (including wholesale) have also increased.
Given the current state of the market, experts predict that it may take up to two years for supply and demand trends to return to normal levels.
How it looks in the market
According to Carsales.com, in 2020 Toyota topped lists as not only Australia’s favourite new car brand, but also the nations favourite used car brand. And with that title, it also tops the lot for greatest price appreciation too.
In December 2019, a second-hand Toyota Corolla fetched a median price of $15 995, but a year later had increased by 18.7 per cent to $18 984.
Across the board, a whole range of Toyota’s has been affected: the Camry saw average prices increase from $16 990 to $20 990, a 23.5 per cent increase; the RAV4 a 21.7 per cent hike from $22 990 to $27 990; and the LandCruiser Prado soared up to $51 990 from $37 990 in 12 months by a 36.9 per cent jump. The HiLux also saw a jump of 48.1 per cent from $27 000 in December 2019 to $39 990 the following year. The LandCruiser 200 arguably saw the greatest increase of a whopping 52.2 per cent. Skyrocketing from a median price of $45 990 at the end of 2019, the figure jumped to $69 990 by the end of 2020.
What should buyers do?
Car advice generally follows the story that better value for money lies in purchasing second-hand cars due to the value depreciation that occurs with new ones. But with pricing trends as they are, and the market not set to correct course for potentially two years, the current suggestion for those looking to buy is to capitalise on the current situation facing the used car sector and buy new. If you want to learn more about the current market or are considering selling your car, chat with the friendly team at Car Search Brokers.
We offer independent advice on which vehicles are best suited for your lifestyle and needs. Even without a specific car type, we advise you on which upgrades and additional features will offer the best value for your intended use.