In welcome news for the automotive industry, used-vehicle prices have rebounded strongly during the month of May, following historic drops in March and April as COVID-19 took its toll on the industry.

According to new figures released by Moody’s Analytics in partnership with Datium Insights, used-vehicle prices rose by 10.6 per cent between April and May, recovering much of the 14 per cent drop witnessed in March and April, the largest two-month decline ever.

The revival of used-vehicle prices has been led by a perfect storm of circumstances, according to Moody’s Analytics senior economist Michael Brisson, including low fuel-prices and the public’s resentment of public transportation in favour of private vehicles in the wake of COVID-19.

“The used-vehicle market benefits from a few distinct facts supporting price stability until economic acceleration can restart,” said Brisson. “Supply constraints, the substitution effect, low fuel costs, and a decline in use of public transportation have all helped prices bounce back from April lows.”

Brisson also pointed to the shrinking new-vehicle market as a reason for the price rise.

The new-vehicle market is in the midst of a 24-month decline in sales, with sales taking a further tumble during the months of April and May as COVID-19 emptied dealerships of customers.

“The slowdown in new vehicle sales that has occurred across Australia over the past 24 months has put considerably fewer [used] vehicles into circulation,” Brisson explained.

“This drop in supply will be further exacerbated as new vehicle sales slump from decreased demand due to the COVID-19 recession hitting the Australian economy.”

Leading the way in the rebound was used-car prices, which rose by 11.2 per cent. Used trucks/utes meanwhile rose by 10.6 per cent.

With new-car sales expected to remain stagnant as the economic slowdown restricts spending, used-vehicle prices are expected to continue their upward trajectory in the short-term.

Source: ABC news | Used Car Prices Rebound from Coronavirus Lows

19 June 2020