The global car industry is recovering from its biggest setback ever. As a result, Australian used car prices have hit record highs.
Data from Moody’s Analytics shows used cars cost 65% more in early 2022 than in 2019. They also cost 18% more than at the end of 2021. Some sellers earn profits nearly equal to their original purchase price. Others pay new-car prices for well-used vehicles.
James Ward, director of content at Drive, says the market is “bananas.” He notes that even standard vehicles now have 12- to 18-month waitlists. We have never seen anything like this. An 18-month-old car can often sell for its original retail price. For example, the Suzuki Jimny fetches unprecedented amounts. Ward says some ads list these small SUVs for $50,000, even though they are only worth $30,000 second-hand.
High Returns on Used Vehicles
One seller in Ballarat, Victoria, sold a ute on Facebook in February. He lost only $1,500 compared to its price eight years ago. He bought his 2008 Toyota Hilux in 2014 for $22,000. It had 170,000 kilometres at the time. In 2022, he sold it for $20,500 with 225,000 kilometres.
The seller believes he could have received even more money with more effort. Losing only $1,500 over eight years is an incredible result.
Why Are Second-Hand Cars Costing So Much?
High demand meets a serious global shortage of new cars. When the pandemic hit, manufacturers slashed part orders. They expected sales to slow down, but the opposite happened. This created a massive lack of vehicles.
During the pandemic, people had more money to spend. Since they could not travel, they bought cars instead. “Production was down, but demand was huge,” Ward explained.
Shifting Family Needs and Tech Shortages
Many families needed bigger cars during the pandemic. Matthew, a resident of Caroline Springs, experienced this firsthand. He needed a larger vehicle for a new baby. He bought a Mazda CX-5 in November but waited until March to receive it. Meanwhile, over 120 people contacted him in one week to buy his used Toyota Yaris.
The “work from home” trend also fueled the crisis. Increased demand for computers and keyboards meant tech companies bought all available semiconductors. These chips are vital for cars. This worsened the global car part backlog. Manufacturers must still work through these massive order delays.
Is It Time to Sell Your Car?
Ward cautions sellers to have a plan before they list their vehicles. “If you sell in a high market, you will buy in a high market,” he warned.
He recommends locking in the price and timing of your next car first. It works like the property market. You risk selling your “home” only to find that the cost of a new one wipes out your profit. However, if you no longer need a car, now is the perfect time to sell.
Advice for Car Buyers in Today’s Market
Ward warns buyers to watch out for financial pitfalls. You must be extremely careful right now. Despite long wait times, he suggests putting a deposit on a new car waitlist.
Waitlists move faster than you think. People often change their minds or cancel orders. Buying new might actually be less risky than buying a used car today.
Avoiding Financial Risks
We see massive gaps between a car’s true value and its asking price. Be cautious about overpaying, especially as interest rates rise. If the market drops, you will find yourself in a terrible position.
If you cannot wait for a new car, research used options carefully. Be flexible with colours or specific models to find a better deal. Ward also suggests looking for cars with remaining factory warranties. For instance, a three-year-old Kia still has four years of protection. These cars offer the most safety if something goes wrong.
“I would look to those cars because they are the ones that offer the most protection if something goes wrong.”
Prior to purchasing a used vehicle, he recommended getting a complete service history and a certified Pre Purchase inspection.
Check our Pre Purchase Inspection Report
Also, read our article: Don’t Skip the Pre-Purchase Inspection
Will the Prices Ever Go Down?
Ward hopes prices will normalize within 12 to 18 months. However, the Russia-Ukraine conflict creates more semiconductor shortages.
“We hope things catch up soon, assuming the current path continues,” Ward said. Higher interest rates might also correct the market. As buying power drops, fewer people will chase expensive models. Demand will slip, and prices should return to levels we saw a few years ago.
Secure Your Purchase with an Inspection
Buying a used car with confidence requires a professional eye. This is especially true while prices remain high. You should never buy an expensive vehicle without checking its history and condition.
German Precision offers expert pre-purchase inspections across Melbourne and regional Victoria. Our team has over 35 years of experience in premium vehicle brands.
Our staff includes:
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Master technicians
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Workshop foremen and controllers
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Service advisors and managers
We provide reliable reports to ensure you make a smart investment. Contact us today to arrange your inspection and avoid a costly mistake.
Contact us today to arrange an inspection.
