Get ready for a change in the used car market as prices may drop, offering buyers an opportunity to snag a great deal on their next vehicle
Used car prices in Australia may drop by 11% or more in 2023, according to Moody’s Analytics, offering buyers an opportunity to purchase used vehicles at lower prices. The used car market in Australia has undergone significant changes in recent years, with prices and availability drastically affected by a global shortage of semiconductors. However, there are signs that the market may be shifting in the coming year with falling prices and increasing supply.
New migrants and international students, who may be in the market for a used car, should keep an eye on developments in the market as they may find better values and deals in 2023. According to Moody’s Analytics, used car prices reached record highs, but they may drop by 11% or more in 2023 due to factors such as rising interest rates and increased cost of living. This may present an opportunity for buyers to purchase used vehicles at lower prices.
The auto market experienced significant changes following the onset of COVID-19 in 2020, with prices increasing due to supply chain disruptions and stimulus measures. However, in 2023, it appears the boom may be coming to an end as used car prices have fallen and there are concerns about the high rate of delinquent auto loans. It is uncertain where the market will head from here, but some experts suggest that buyers who wait may be able to find better deals in the coming year.
Six years ago, cars in Australia were relatively affordable and easily accessible, but today, prices have skyrocketed and availability is limited. This is primarily due to a global shortage of semiconductors, the tiny but crucial chips that cars need for critical functions such as safety features, power management and displays.
In 2016, it was reported that many cars were still priced at levels from 20 years prior, with the cheapest Toyota Corolla being $19,490 plus on-road costs, compared to a similar 1995 model costing more at $22,870. However, this trend has now changed and a 2023 base model Corolla now costs $28,130, a nearly $6000 increase.
Despite the increasing costs, there is some hope for the used car market in Australia. ABC News reports that “we are starting to see signs” of a shift in the market with customer sentiment reducing and supply of vehicles increasing in the first half of 2023.
The average cost of used cars in Australia has now been falling for six months, offering some relief to buyers priced out of the hot market, according to a new report. Compiled by Moody’s Analytics, the latest Used Vehicle Price Index shows transaction costs decreased a further 2% from October to November. The data shows prices for used vehicles are now lower on average than they were at the start of the year. In May 2022, used vehicle prices were 18.4% greater than May 2021.
It’s worth noting that even though prices are falling, they are still 55% greater than they were in January 2020, just before COVID-19 wrought havoc. The pandemic caused supply of new cars to dry up, while inflationary factors have made the bite deeper. These two factors sent demand for used vehicles skywards, which in basic economic terms is a driver of higher prices. Used-vehicle prices continue to fall back towards earth. Prices in November fell yet again, marking the sixth consecutive month of decreases.
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