Carsales Australia boss Ajay Bhatia says higher prices for second-hand cars are here to stay for some time to come as consumers pay top dollar for vehicles posted on the online car classifieds group’s platform.
Mr Bhatia said that the recent surge in used car prices was unprecedented and buoyed by people spending on vehicles rather than international travel, avoiding public transport and a COVID-induced slowdown in auto manufacturing.
“This situation won’t be solved within the next month, this is here for many months for sure and whether it stays for a year, or two years, is the question,” he said.
Used car prices are typically stable, sometimes moving up or down just a couple of per cent. However, new data from Carsales shows that the most popular second-hand vehicles on its platform have recorded double digit price growth.
The average price for a used Toyota Landcruiser on the site last month was $62,500, up 25 per cent on October 2019 and the biggest rise of all SUVs/utes. This was followed by the Toyota Hilux, up 23.2 per cent to $33,000. The overall median price of used cars listed was up 19.4 per cent to $23,888.
Prices for top-selling passenger cars have also risen. The three most searched for passenger cars on the site in October were the Mazda 3, Volkswagen Golf and Toyota Corolla. The median price of these vehicles was up 14.6 per cent year, 12 per cent and 9.4 per cent respectively, year-on-year.
It’s truly unprecedented, what’s happening with used car prices at the moment in Australia.Ajay Bhatia, Carsales Australia managing director
What makes the price jumps more notable is that earlier this year when the coronavirus pandemic first hit Australia, the prices of used vehicles on the site crashed for two months, before rebounding.
ASX-listed Carsales, valued at $5.1 billion, saw its stock price hit a 2020 low of $10.47 on March 23, the same day the S&P/ASX200 hit its COVID low. However, the stock has since recovered over 97 per cent to close last week at $20.69, while the broader market is up 43.8 per cent.
The broader auto industry was also hit hard by the pandemic, with new car sales across Australia down 48.5 per cent in April, the biggest decline recorded in almost 30 years of tracking the numbers. The slump suggested that Australians spent at least $1 billion less on new cars in April this year than in the same month last year.
Mr Bhatia said that in addition to an aversion to public transport because of fears of the virus, changes to superannuation rules enabling people to access their super had also helped lift prices.
Industry experts have noticed something else unusual about used car prices, with some vehicles less than a year old now selling second-hand at a higher price than what the buyer paid initially at the showroom.
“If you bought a car in the last 6-12 months then there’s a good likelihood that it’s worth more than what you bought it for. And I never thought I’d say that for cars, because cars are known as depreciating assets,” he said.
Mr Bhatia expects demand to stay high for used cars, but said supply issues would improve and eventually put downward pressure on prices.
Supply constraints vary depending on where new cars are being made, but some key factories have operated at reduced capacity this year, while others closed because of COVID, forcing some Australian buyers to wait months for new, imported vehicles.
Carsales has recently launched a new interactive tool, known as FACTS+, to enable customers to get comprehensive information on cars such as recall and odometer history, latest reviews and information on searches and saved views by other buyers.
Mr Bhatia said FACTS+ would help consumers determine whether they’re paying a fair price. “It gives you the insights into what is happening in the market right now.”
Source: Thanks smh.com