While Australia’s used-car market experienced some fast and furious price growth over the past 18 months, experts warn that the end of the road is in sight for those looking to use their vehicles as an asset.
According to a new report by Moody’s Analytics, “It took a confluence of unpredictable circumstances – a highly transmissible virus, a surge in demand for consumer electronics, a fire at a major auto chip producer, and a rapid recovery in worldwide new-vehicle sales – to flip the market on its head.”
While prices in the used-car market are expected to remain elevated for the rest of 2021, “it will not take that much for the market to return to normal”, they said.
Over the past 12 months, Moody’s Analytics found that used-car prices in Australia rose 34 per cent.
However, the rate at which prices have been rising has slowed in recent times, with the sector recording just 10 per cent price growth over the past six months.
After a clear deceleration of price of appreciation in June, Moody’s Analytics predicted that “the most likely path forward” for the market is “a smooth and steady decline in prices over the short to medium term as the supply of vehicles returns and the market reaches equilibrium”.
The report followed similar findings by the Commonwealth Bank of Australia back in January, who noted that “one of the standouts in the COVID-19 environment has been the lift in demand for used vehicles, driving prices sharply higher”.
“Most car owners expect to see the value of their rides slipping over time, rather than rising. But used vehicle prices are up more than 35 per cent compared with a year ago. That lift in used-car prices boosts personal wealth and spending and borrowing capacity,” CBA said.
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