For the first time since April 2020, Australian used vehicles experienced a month-on-month price drop in August and September.

According to the Datium Insights – Moody’s Analytics Price Index, used auto prices have fallen by five per cent since the peak reached in July. Still, prices remain 11 per cent higher than last September and 36 per cent higher than pre-COVID-19.

Passenger vehicles dropped by more than four per cent whereas larger vehicles have dropped by slightly less than three per cent since the beginning of the quarter. Despite this, prices still remain elevated for both segments, with cars up 35 per cent and utes gaining 39 per cent.

The report suggests this strength of utes is being driven by a lack of inventory, which has kept prices steady despite headwinds from rapidly rising fuel prices.

According to Moody’s Analytics AutoCycle residual value forecasting tool, a 2020 Toyota HiLux that has driven 15,000 kilometres starting in January 2020 is worth the same amount today as when it was driven off the dealer’s lot.

“The recent price drop across segments Is a welcomed reprieve from the exorbitant levels consumers continue to experience,” the report states.

“Nevertheless, the root of the pullback in prices is more cause for alarm than reason for celebration.”

Extended lockdowns in New South Wales and Victoria have had a large impact on consumer activity. Countrywide activity reportedly dropped to levels comparable to May 2020, a period when Australia first felt the sting of lockdowns.

Consumer sentiment is down a little more than 8 per cent from the recent peak last April but remains above pre-pandemic levels.

Consumers have also remained willing to go out and purchase new vehicles. New vehicle sales have dropped into the range of late 2019 but are nowhere near the pullback of early and mid-2020.

The limited number of new vehicles sold have translated into fewer used vehicles available.

“For every vehicle not bought, there is one fewer traded-in. Additionally, the lost kilometres driven because of lockdowns and work from anywhere have caused less need to turn over fleets and purchase new inventory,” the report continued.

The auction transaction data show auction inventories have remained low since the second half of 2020. With high used vehicle valuations and limited inventory for both new and used vehicles, consumers and sellers alike are maintaining a tight grasp on the vehicles they have.

“The two-month price decrease of August and September is not a harbinger of sustained downward movement in the near term.”

“Barring any unforeseen setback in the Australian economy, prices will remain well-supported by steady demand and a lack of inventory on the new- and used- vehicle market.”

Additional demand is expected for private transportation as Australians remain wary of public and shared transportation.

“Used-vehicle prices are expected to move sideways through 2022 when the new-vehicle market’s supply-chain issues have been worked out. Until then, elevated used-vehicle prices will continue to be the somewhat new normal.

Source: Moody’s Analytics | Australian Used-Vehicle Third-Quarter Price Report

19 October 2021