Used car prices are decreasing slower than anticipated

Used car prices are decreasing once more, but at rate much slower than anticipated.

New car supply issues caused used car prices to surge earlier in the year, however as these obstacles are overcome, many second-hand car prices are now coming back down.

Financial data from Moody’s Analytics revealed that used car prices are expected to continue downward after declining in the last three months. This is due to improvements in new car supply and high interest rates, which will reduce the demand for used cars.

Used car prices declined by 1.6 per cent from May to June and, at present, are 6.7 per cent lower than during the same time last year. Utes and SUVs were down 0.9 per cent. The latter group has seen the biggest fall since last year as they’re down 12.6 per cent compared to 6.1 per cent for cars.

Moody’s Analytics expects used car prices to decrease to approximately four per cent in 2024 after it declined by 9.3 per cent in 2023, a rate much slower than anticipated.

Prices for used cars are 18.6 per cent lower than what they were at their peak in May 2022, however, they are still 44 per cent higher than the pre-pandemic level in June 2019.

Current government monetary policy and the state of the economy have impacted used car prices. High borrowing costs have eroded disposable income and undermined consumer confidence, both contributing to the slower decline of used car prices.

Moody’s Analytics doesn’t anticipate further interest rate hikes; however, they also don’t expect a reduction in the cash rate until later in the year therefore predicting that household spending won’t increase significantly for the remainder of the year.

Car production in China increased 11.6 per cent in 2023 while Japanese production was up 18.2 per cent. The higher volume of cars is expected to put further downward pressure on used car prices.

Australian Automotive Dealer Association (AADA) CEO James Voortman said that car buyers were benefitting from a greater variety of used cars for sale at a lower price however there hasn’t been a surge in sales despite this.

The June edition of the Automotive Insights Report (AIR) reported that vehicles that retained their values best were virtually exclusively small cars in the passenger segment.