As prices continue to climb, used cars cost 65% more in the first three months of this year than in 2019, and 18% more than at the end of 2021, according to Moody’s data. Analytics.
Some drivers manage to sell used cars almost as much as they bought them years ago, while others pay new car prices for well-worn vehicles.
“You have ridiculous waiting lists even for regular cars, waiting times of 12 to 18 months.
“And seeing used cars go up in value is also something we’ve never seen.
“In many cases, you are able to sell a car that is 18 months old for essentially what you paid.”
Ward said certain types of cars, such as the highly sought-after Suzuki Jimny, fetched even more extraordinary prices.
He said the small four-wheel-drive vehicles were worth $30,000 used, but had been advertised in many places as being on sale for nearly $50,000.
Dan Baxter, from Ballarat in western Victoria, sold his ute on Facebook in February for just $1,500 less than what he had bought eight years earlier.
“I bought the 2008 Toyota Hilux in 2014 for $22,000 with 170,000 km. I sold it in February 2022 for $20,500 with 225,000 km,” he said.
The father thinks he could have charged even more for his ute if he had put more effort into the sale.
“However, losing just $1,500 on a car in eight years is pretty good,” he said.
The unprecedented prices paid in the used car market raise questions, should people sell their cars now? And what should they do if they need to buy?
We asked Ward for his expert opinion on the situation.
Why are used cars so expensive?
Used cars are being sold at such high prices because there is a greater worldwide shortage of new cars than ever before.
In short, the car shortage was created because automakers stopped ordering as many auto parts when the COVID-19 pandemic hit, thinking sales would slow.
However, the demand for cars actually increased because people had more money to spend on cars during the pandemic, being unable to travel or spend on their usual activities.
“So there was a huge demand for cars and a slowdown in production,” Ward said.
The rush of people having babies during the pandemic has also led to more people needing a new car to increase height.
Matthew, who lives near Caroline Springs, found himself in exactly that situation.
“We needed a bigger car because we were going to have a baby,” he said.
“We bought a brand new Mazda CX-5 in November and had to wait until March to receive it.”
He is now trying to sell his used Toyota Yaris on Facebook and has received over 120 requests from buyers in a week.
The global backlog of auto parts orders was then compounded by people working from home and ordering more computers and keyboards, leading to electronics manufacturers grabbing all semi- drivers available, which are vital parts in cars.
Automakers then had to wait for more parts to be produced to place car orders.
The market is currently struggling to catch up with the huge backlog of orders.
Should you choose to sell your car now?
Ward warned anyone thinking of selling their car to make sure they have planned what they will do once they are gone.
“If you sell in a high market, you are going to buy in a high market,” he said.
He advised people who need a replacement car to lock in the price and timing of their next car before making a sale.
“It’s just like property, you run the risk of selling your house and having to buy in a case where your net change isn’t great,” Ward said.
However, if drivers have a car they don’t need, he said now is the time to sell them.
“Because it’s never been a better market for sellers,” he said.
Tips for people buying a car right now
Ward advised anyone buying a car at the time to beware of financial dangers.
“You have to be a very, very careful buyer, especially when you’re using finance right now,” he said.
He advised buyers to put down payments to get on waiting lists to get new cars, despite expected long waiting times.
“What could happen is that if there are 10 people in the queue in front of you, six of those people may change their mind or decide not to and all of a sudden you increase the queue very quickly,” says Ward.
He said buying a new car is unlikely to put drivers at risk of paying too much for the car, unlike the high risk associated with buying a used car right now.
“With used cars, we see these huge discrepancies between the kind of value you expect to pay and what people are asking for,” he said.
“Drivers need to be very careful not to pay more for a car than they really should, especially with rising interest rates.
“Because if the market corrects, you’re going to be in a really bad shape.”
Ward said that for people who couldn’t afford to wait for a new car, there were still used cars with decent prices for their value, but buyers should shop around, do their research and be open to passing up the exact color or pattern they were looking for.
“Don’t overpay,” he stressed.
“If you’re considering buying a car that seems expensive for what it is, don’t.”
Ward also advises anyone buying used to look for cars that still had a warranty.
“If you buy a three-year-old Kia, that car would have had a seven-year warranty when it was new.
“So that means it still has four years of warranty left.
“These are the ones I would watch, because they are the ones you are most protected with, in case something goes wrong.”
He also advised anyone buying a used car to get a full maintenance history and a certified mechanical inspection before buying.
When are used car prices expected to drop?
Ward said auto experts hoped car prices would start to normalize in 12 to 18 months.
“But we kind of said that 12 months ago, because we didn’t know the situation in Ukraine was going to happen,” he said.
“We really hope things will catch up in the next 12 to 18 months – but that’s assuming everything sort of continues on its way,” Ward said.
He said rising interest rates would help correct the market a bit, reducing the number of people buying cars, especially the more expensive ones.
“Demand will decrease and people will start looking for cheaper cars,” he said.
“And we will start to go back to the system that we knew a few years ago.”
Moody’s Analytics also predicts that in the “short term” used car prices are likely to remain high.
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