Buying a used car is a big decision and one of the most significant investments you’ll make in life, which can make it an exciting, rewarding and nerve-racking experience.
Motoring
Are used car prices falling in Australia in 2023?
Is it a good time to buy a used car? Experts weigh in on where used car prices are heading in 2023.
Buying a used car during the pandemic era in Australia has taken a lot more than simply saving the money. It’s also required a healthy dose of patience, some flexibility – and often a bigger budget and used car loan than most had banked on.
That’s because used car prices hit record highs off the back of increased demand and a shortage of supply of new vehicles into the country.
In many instances, people looking at new cars were forced to look for a near-new alternative, in turn pushing used values up – with some savvy sellers able to make healthy profits on cars throughout the pricing fluctuations. It also seemed to embolden some brands in Australia to increase prices on new models, in turn further pumping prices of used cars.
More new cars coming into Australia
Key to the unprecedented boom in used car values was a shortage of new vehicle stock.
The car market is a relatively simple beast driven by supply and demand.
If a particular model is in hot demand – with more buyers than vehicles available - it’ll typically sell at higher prices with discounting limited or non-existent.
Conversely, if there is excess of brand new cars, manufacturers will generally discount prices to shift them.
Since mid-2020, because of issues triggered by the pandemic, many mainstream brands have had a shortage of new car stock.
So, those once-common ads offering thousands of dollars off the sticker price or discounted finance – among other deals – mostly dried up.
But the car market is returning to normality, according to Ross Booth, the General Manager of car valuations giant Redbook.com.au.
“New car supply is starting to get more consistent,” says Booth. “There are still long waiting lists for some vehicles, such as Toyota hybrids, but as a general statement, new car supply has certainly freed up.”
Used car market is cooling
Having healthier supply in the new car market has a direct effect on values in the used car market.
While there are still pockets of strength in the used car market – especially with some in-demand off-roaders – Booth says the result is a “general downturn” of prices. He says the market still has some volatility, but since mid-2022 there has been an easing of used car prices as a more typical used car depreciation pattern kicks in.
“It’s 10-15 per cent down, we estimate,” says Booth, while cautioning there are variations across the used car market and specific brands.
“We are seeing more normalised conditions. So, supply coming back and … flowing to new cars which means used cars are coming down.”
Used car prices can depend on the market segment you’re shopping in.
Matthew Wiesner is the managing director of the Sime Darby Group Australia, which owns dealerships from a diverse range of brands.
He says the used vehicle market is still very competitive below $40,000, with strong demand - especially for Japanese and Korean models that have a reputation for value and reliability, something that ensures they are commanding healthy prices.
But he says there are opportunities elsewhere, especially in the prestige realm.
“For those who can afford that end of the market there’s certainly more competitive opportunities in that space than what there were 12 months ago.”
Some Toyota hybrids, like the RAV4, are still in high demand but overall new car supply is more consistent in 2023. Photo: Supplied
More used electric cars available
There was something of an electric vehicle rush in 2022 and it led to some people selling near-new examples of popular electric cars for thousands more than they were brand new.
It was all because supply of new electric versions into Australia was restricted.
But that’s now easing, particularly with Tesla, which sells the top two selling EVs in the Australia, the Model 3 medium sedan and Model Y medium SUV.
There are hundreds of Model 3s available on classified websites in Australia, some asking less than $50,000. The Model Y that arrived in the second half of last year is also available in decent numbers as a used vehicle, with buyers able to save thousands compared with the price of a new one.
Prices are also looking more reasonable for some electric popular models from the likes of Hyundai, Kia, Nissan and BMW.
The return of the new car deal
The pathway to some sort of normality in the car market also means the potential to crunch a sharper price on a brand new car.
Booth says deals are heading back into the new car market and in some instances there’s more potential to negotiate. Manufacturers including Hyundai, Kia, Mitsubishi and Mercedes-Benz are among the brands that are starting to tempt buyers with offers and discounts.
“With more supply coming, there will be more competition from some [manufacturers] wanting to sell vehicles, so deals will come back,” says Booth. “We are starting to see it now with special offers.”
There’s a bit of a sting in the tail, though. Countering those deals are years of price rises on new cars across the industry.
Most new cars are now more expensive than they were a few years ago – in some instances by 10 or 20 per cent - or more. The raw used car values can also be healthier than they were previously because of their relationship with the price of new vehicles.
Booth says that can temper some of those occasionally rosy car depreciation numbers.
“When new car prices increase, with used cars, the percentage (of depreciation) may be the same (as it was previously) but the dollar figure is higher,” he says.
In other words, you may theoretically be paying more for a used vehicle than you did a year or two ago even though it has recently depreciated at a faster rate.
Hundreds of pre-owned Tesla Model 3 electric sedans are available to buy on the used car market. Photo: Supplied
Where to next for used car prices?
No one knows with certainty what will happen with used car values in Australia in 2023. As we’ve seen in the past, used car prices can be heavily impacted by macro-economic events, such as pandemics and recessions.
High interest rates will likely have some impact, possibly inching prices further down.
Wiesner says the fate of the used market rests with supply volumes, especially in the new car market.
“Once those things have settled down and consistent supply comes back in from a new car point of view, that will definitely have a relationship for where the used car market settles.”
But experts generally agree the days of lofty used car prices are on the wane.
All of which suggests those in the market for a used vehicle will at least have more certainty about what they will likely pay, and could even pick up something of a bargain.
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