As car buyers move away from large, less fuel-efficient cars, now is the time to purchase second-hand utes or SUVs.
Research revealed that Aussies are purchasing small, fuel-efficient used cars instead of their fuel-hungry counterparts like utes and SUVs as consumer confidence declines amid the increasing cost of living.
Due to this, the value of used utes and SUVs are depreciating faster than light vehicles according to an August 2024 analysis from Moody’s Analytics.
According to Associate Economist at Moody’s Analytics, Catarina Noro, heavier, less fuel-efficient cars have depreciated more than their counterparts since 2022. Ms Noro said that the value of passenger cars has been more resilient in the resale market.
“In Australia, used light vehicle prices are currently still 49 per cent higher than before the pandemic, in contrast to trucks and SUVs, which are just 21.1 per cent higher.
“This discrepancy can be attributed to an undersupply of new lighter vehicles during the semiconductor shortage when manufacturers prioritised larger, more profitable vehicles.”
Furthermore, Ms Noro said that fuel prices, while no longer at their peak, are still much higher compared to pre-pandemic, which means that consumers will prioritise lighter cars that have better fuel efficiency.
Are used car prices declining in Australia?
While there was a small increase in July, the used car prices resumed their descent in August; Moody’s Analytics recorded a decline across all car types.
The price decrease is attributed to the growing new car production with Chinese production increasing by 11.6 per cent and Japanese production increasing by 18.2 per cent in 2023.
It’s predicted that the gradual decline of used car prices will continue for the rest of the year, and the overall price drops will remain slower compared to the trajectory in 2023.
“An extended period of high interest rates could further diminish demand by increasing the cost of auto loans. On the other hand, recent tax cuts and cost-of-living supports could have a stronger-than-expected boost in demand, putting upward pressure on prices.
“Finally, any further disruptions in the supply chain or intensification of geopolitical risks could lead to price increases. Such adjustments would impact not only the new-vehicle market, but likely would also have a cascading effect on the used-vehicle market.”
Used car sales data from July showed passenger cars like the Toyota Corolla, Yaris and Kia Picanto retained their value bettwe compared to SUVs like the Nissan Patrol, Toyota LandCruiser and Jeep wrangler.
Passenger cars aged between two and four years old had an average retained value of 82.1 per cent while their SUV counterparts retained 76.3 per cent of their value while utes retained 77.8 per cent of their value.
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