Australian used-vehicle prices have continued their historic rise in July, breaking new ground as the sector continues to thrive amid new COVID-19 outbreaks around the country.

With demand for vehicles continuing to grow as COVID-19 turns commuters away from public transport in favour of private transport, used-vehicle prices increased by 6 per cent from June to July, according to Datium Insights – Moody’s Analytics Price Index.

The latest rise comes after prices soared by 11 per cent between May and June as demand continues to outpace supply.

With this result, used-vehicle prices have now risen by a massive 30.8 per cent since crashing in April of this year and is up by 16.2 per cent compared to pre-pandemic prices at the beginning of the year.

The growth comes despite economic uncertainty facing many Australians following COVID-19.

According to Federal Treasurer Josh Frydenberg, the real unemployment rate may have hit as high as 13.3 per cent on the back of the latest shutdowns in Victoria. The forthcoming cuts and changes to JobKeeper and JobSeeker schemes have also played a part in the uncertainty.

But even with these aspects weighing down the industry, prices continue to rise, supported by a multitude of factors.

On top of declining interest in public transport during the pandemic, low fuel prices and a rise in consumer confidence in certain parts of the country has also had an effect on prices, as did the sharp drop in the number of used-vehicles available.

With new car sales down near 20 per cent between 2018 and 2020, the knock-on effect is that the number of vehicles now hitting the used market has quickly dried up, with many consumers now preferring to purchase a used-vehicle over a new one. This has caused prices to rise as competition for available vehicles becomes much fiercer.

The unprecedented growth seen in used-vehicle prices in recent months has reached a point never before seen. For comparison, the most recent two-month rise is comparable to the rise in used-vehicle prices between the end of the Global Financial Crisis in 2008/09 and the beginning of 2020.

With prices continuing to break records despite gradually improving conditions around the country, dealers are now asking when will this historic price rise end?

Supply of used-vehicles is expected to improve as we move towards the end of the year, with owners set to take advantage of the unprecedented prices, which may ease the strain on the market and bring prices down.

Conversely, a re-surging Korean won and Japanese yen may lead to an increase in the price of new-vehicles being imported, which may put pressure on the struggling market.

Source: Moody’s Analytics | How High Can They Go? Used-Vehicle Prices Continue to Defy Gravity

26 August 2020