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Motoring
The problem buying a new or used car in 2022
For the first time on record, some used cars are selling for a higher price than the cost to buy the same model new. How did this happen?
The COVID-19 pandemic is proving to be a good time to sell cars.
Demand for new cars is so strong there is no discounting at dealerships. In turn, that has led to rising prices for used cars.
The situation is best illustrated by the Toyota LandCruiser 300 Series. The popular Sahara a variant sells for $144,000 driveaway from a dealership.
The price on online used-car classified sites is up to a staggering $175,000, or more than $30,000 over the original price of the car.
Buyers are paying that premium in preference to waiting a forecast six months for a new one.
The Toyota RAV4 is similarly affected. The official driveaway price for a new RAV4 Cruiser all-wheel-drive hybrid is $53,833 in Victoria.
Buyers face a delay of up to nine months and many aren’t prepared to wait that long, which has seen prices of second-hand vehicles soar to an average of $61,000.
Volkswagen is also feeling the pressure. The Golf hatch and Tiguan SUV are its most popular models, and both have wait times of up to five or six months.
The scenario affects virtually all major carmakers, with the exception of the Chinese-built vehicles and Mazda.
Toyota is a victim of its own popularity, with supply constraints across the range, especially for hybrid versions
Mazda Australia leverages role
Mazda Australia managing director Vinesh Bhindi told the Australian media that our nation’s significance to the company ensured we get preferential supply, limiting wait times to three-to-four weeks on most models.
“We are fortunate to be one of Mazda’s best-performing markets, affording us good allocation from the factory,” he says.
The supply squeeze also means dealerships don’t have to haggle: if you don’t want to pay full price, the next person through the door probably will.
News agency Reuters reported that Toyota, Honda and Nissan were experiencing record profits per car and improving their bottom lines despite building fewer vehicles.
Mazda Australia has priotity access to vehicles, so expect the wait to be around three to four weeks
Glass’s Guide expects more to come
Glass’s Guide monitors car prices in Australia and managing director Santo Amoddio expects the high new and used-car prices to continue throughout 2022.
"We've been monitoring the used car market for more than 30 years and this is the first time over that period that we've seen car prices rise consistently month in, month out. It has been like that since April last year."
“In terms of used car prices, we’ve seen prices rise by up to 30 per cent for some models. We’ve seen cars that are four-to-five years being sold for the price people paid for them.
“The semiconductor shortage seems to be the main issue but the (COVID-19) pandemic has impacted car production at every level, from not having enough production staff to having to socially distance on the factory floor, not having enough crew for ships or for the trucks that transports the vehicles on and off the boats.
All car manufacturers are balancing stock shortage with premium prices for cars.
GM and Ford in the US are also predicting huge profits and Tesla has also announced a record result, though that is off the back of record sales.
Tesla responded to the semiconductor shortage by re-writing code for chips it could access and as a result wasn’t as impacted as traditional car makers.
Amoddio says the result is an exception.
“The pandemic really is the perfect storm and the high prices reflect that.
“Toyota definitely with their hybrid models are struggling to meet demand and that is a direct result of their global popularity.”
“In the big picture, when you go back to before COVID hit, the Australian new car market had been in decline for 18 months.
“Businesses and private buyers are now looking for an uptick and buying new cars is one of the ways they do that.”
“The other issue is that Australia is now a 100 per cent import market and one of the few right-hand drive markets in the world.
“To get a car out of a plant in Europe built for us is a tough ask ... car companies know they can make just as much profit by shipping it to the UK and the logistics of getting it there are much easier than they are for Australia.”
MG is one of the few car brands not facing long delays for product
Chinese-built vehicles exempt
Mr Amoddio says only the Chinese-built vehicles on sale here seem relatively unaffected and the pandemic is affording them a quick entry into the market.
“If you’re desperate for a new car you can go down to an MG dealership and buy one, right now,” he notes.
“They still aren’t discounting, though. I know of a rental company that was desperate for new cars and bought 200 vehicles from MG.
“They could only negotiate a five per cent discount of recommended retail ... pre-COVID that would have been a 20-25 per cent cut.”
Mr Amoddio says private buyers are in the box seat.
“If you’ve got a spare car at home that you don’t really need, now’s a good time to sell it ... I can’t foresee a time when you’ll score a better deal.”
The information provided is general advice only. Before making any decisions please consider your own circumstances and the Product Disclosure Statement and Target Market Determinations. For copies, visit racv.com.au. As distributor, RACV Insurance Services Pty Ltd AFS Licence No. 230039 receives commission for each policy sold or renewed. Product issued by Insurance Manufacturers of Australia Pty Ltd ABN 93 004 208 084 AFS Licence No. 227678.
