Used car prices reached an unprecedented level in 2022, and certain models even surpassed the sticker price of a brand new model.
The good news is that prices of used cars in Australia have been steadily declining for seven months now. Moody’s Analytics Used Vehicle Price Index shows that prices are lower now than they were during the same period a year ago. Last November to December 2022, the average decrease was 2.2%.
Experts predict that the prices will fall 10% further this 2023 but will still remain well above pre-pandemic price levels at 54%. The decline is due to the fact that the supply of new vehicles around the world is replenishing, and more cars are available for purchase.
Back in June 2022, statistics revealed that the average asking price for used cars was more than $39,000, a significant increase from $27,000 just two years prior. But with today's market conditions, used car prices may be lower.
A prominent dealership CEO also mentioned in an interview with Drive that "Good cars and in-demand cars that are in short supply are still holding strong, but run-of-the-mill cars are either back to pre-COVID prices or on their way back to pre-COVID prices, and it's happening very quickly."
The COVID-19 pandemic caused a massive disruption in the global auto industry, with many manufacturers reducing or ceasing production. There was a particular shortage of semiconductor chips, as chipset manufacturers allocated production to consumer electronics instead.
Naturally, this has propelled used car prices to record highs, as the demand for cars far exceeded supply. Australians were also veering away from public transport for fear of infection, which contributed to the higher prices.
While the current downward trend in used car prices is a welcome change, it’s important to consider another significant factor in its decline: rising interest rates. The Reserve Bank of Australia (RBA) has been aggressively raising the cash rate in the past year in an attempt to slow demand and consumer prices.
The current rate is 3.10%, a number last reached in October 2012, when the median Australian house price was $520,000. Compared to that period, borrowers with $500,000 mortgages now have to pay an extra $834 a month on repayments.
House loans have a direct correlation with car loans, and as such, many Australians are hesitant to buy new cars when they’re already paying more on their mortgages. This is why the prices of used cars remain attractive for buyers who simply want a reliable vehicle without having to spend too much.
Another cause for the decrease in used car prices is that many Australians are opting for more fuel-efficient and environmentally friendly vehicles. Sales for new electric vehicles have surged by 65% in 2022, accounting for 3.39% of total new car sales.
Major industry player Tesla also slashed its global prices by as much as 20% after missing Wall Street estimates. In Australia, prices for the Model 3 sedan and Model Y SUV dropped by $1,600 to $3,900.
While the total electric car sales is not an impressive share, it's important to consider the sudden shift in consumer demand. Interest in electric cars may continue in 2023, as more Australians become conscious of their carbon footprint.
All these factors combined mean that used car prices in Australia will continue declining over the next year or two before stabilizing. While this is great news for buyers, it could be bad news for sellers as they may have to lower their asking price significantly in order to make a sale.
That being said, don’t expect used car prices to drop drastically overnight - the process will take time and patience. It’s important to do your research and compare prices from different dealers before making any decisions.
Ultimately, the state of used car prices in Australia 2023 is one that’s showing promise. Prices have been steadily declining and will continue to do so for the foreseeable future. This could be a great opportunity for buyers who are looking to save some money on their next vehicle purchase.
Should You Buy a Used Car?
Given the current state of used car prices in Australia, it may be a good time to buy. Prices are lower than they were before and you can get great deals on well-maintained cars. However, do your due diligence and research properly before signing any paperwork.
If you plan on financing, remember that interest rates are higher than they were pre-COVID, so consider the total cost before taking out a loan. You can most likely get better deals on run-of-the-mill cars, but if you’re looking for a luxury car or something rare, expect to pay more.
You can find all types of used vehicles in the market today, from luxury cars to family cars. OnlyCars.com.au is a great place to start your search, as we have an extensive inventory of cars that you can browse through and compare prices with ease. We also make it easy to connect with reliable dealers and private sellers.
However, if you're looking for peace of mind, better financing rates, or 2023 models, you might go for a new car. It may be more expensive, but you'll get the latest features and technology as well as a comprehensive warranty. You can get pre-approved for finance on a new car purchase through Credit One.
Overall, used cars in Australia remain an attractive option for those who want to save money while still getting reliable vehicles. Prices are expected to stay low throughout 2023, so if you’re looking for a good deal on your next car purchase, this may be the time to act.