Anyone hoping that the crazy prices we’ve seen on the second-hand car market over the last few years were starting to settle – we’ve got some bad news for you.
After three extremely liminal and trying years, we finally seem to be getting back to normal post-COVID (never mind the fact that COVID hasn’t actually gone away – go get your boosters and flu shot, people). But one thing that isn’t going back to normal is car prices, either new or used.
While some publications are suggesting that we’ve seen the worst of our overinflated second-hand car market – and that we’re about to see prices start to fall and normalise – Mike Sinclair, Editor-in-Chief at Carsales, Australia’s largest car classifieds, suggests otherwise.
“The pandemic affected many of the levers that set used car prices – everything from base-level consumer demand through restrictions on trading ability, and [also] availability of the new cars necessary to fill the conveyor belt,” Sinclair recently expounded on LinkedIn.
“There are suggestions that some, if not all, of those levers are normalising. For some, the assumption follows that used car prices will return to previous levels. For those people, I’ve got bad news. Certainly, demand is being tempered by tougher economic times but buyer interest is far from being throttled.”
Mike Sinclair
“Yes, there is some normalisation of new car supply – but that too is patchy and could remain so into 2025. But even if all of these things happen, one key factor is likely to keep used car prices high – the cost of new cars,” Sinclair explains.
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Indeed, new cars have never been less affordable than they are right now in Australia. Consider this: there are only two new cars for sale in Australia right now that have a drive-away price under $20,000: the Kia Picanto and the MG3. Cars are just way more expensive these days.
This is a combination of a variety of factors: inflation (unsurprisingly); ongoing supply and labour issues thanks to COVID; ever-stricter safety and emissions standards; the war in Ukraine disrupting supply chains…
WATCH a Porsche dealer unwrap a brand-new 911 below.
“Production costs are higher. Component shortages are prioritising higher-margin models and line-ups. The impact of EV research and development costs on car makers’ bottom lines is also playing a part. And demand is strong, so why not retain margins,” Sinclair cynically posits.
“If a run-of-the-mill new family car was $25K and now has a sticker price over $30K, that will inevitably affect the cost of comparable used cars. And that’s exactly what’s happening – and is set to keep happening.”
Mike Sinclair
Better start saving.