Why Have Used Car Prices Increased and Will They Drop in 2022?
Once upon a time, the used car market offered monetary relief for customers looking to buy; however, with global shortages in the face of an ongoing pandemic, the price of used cars in Australia has skyrocketed.
According to Car Expert, used passenger car prices grew by 18 per cent in the first quarter of 2022, while commercial vehicle prices grew 16 per cent compared to the same period in 2021. Carsales Editor in Chief, Mike Sinclair described a ‘perfect storm’ of interruptions as the key factor driving used car prices higher.
How Did This Happen?
Since early 2020 global supply chains have taken a considerable hit. In an industry that depends on its ability to move things around i.e. parts are made in one country and shipped to another for assembly, present day car making has become an intricate global dance.
Ongoing shortages of semiconductors, restrictions, and the war in Ukraine, are causing all types of chaos on the automotive supply chain. Plus with an ongoing competition for cargo space and a shortage of shipping containers customers have been left waiting 12 months or more for new car deliveries.
To avoid long wait times customers in some cases are paying more for demo vehicles they could drive off the lot rather than wait for a brand new vehicle.
What Does This Mean?
With fewer new cars being made, customers are turning to the used car market. And with the lack of new car sales, less cars are being traded in, further driving up used car prices. As a result online searches for used cars Frankston and used car dealers Frankston have increased.
According to Drive Magazine, Content Director James Ward, used-car market conditions across Australia are simply unprecedented, ”we’ve never seen anything like this, it’s bananas.” Used car sales Frankston searches sky rocketed from 2020 as the effects of the pandemic started to take hold.
CarsGuide data indicates customers shopping for a 2011 Ford Ranger are paying roughly $24,000, up from $18,000 in June 2020 – a 40% increase. Comparatively, in the small car market, a new 2020 Mazda 3 at $26,000 can be bought secondhand for around $34,000.
Have Used Car Prices Peaked?
Moody’s Analytics Price Index report indicates, used car prices are expected to move sideways until midway through 2022 as the new-vehicle market’s supply-chain remains tight. With car manufacturers fighting slow supply of new vehicles, it’s unlikely used car prices in Australia will return to pre-pandemic levels any time soon.
When Are the Prices of Used Cars Expected to Drop?
Over 12 months ago car experts were expecting used car prices to return to normal within 12 to 18 months’ time, however as we tick over another 12 months unforeseen factors such as the war in Ukraine have changed the market. As the conflict continues, so does the disruption to the semiconductor market, creating further shortages of car parts.
Add to this rising covid infections in south-east Asian factories and semiconductor shortages, Toyota has forecasted delays of up to 10 months on its most popular new cars.
Fortunately in the meantime however, dealers have been presented with an opportunity to maximise sales elsewhere, particularly used cars. Used car sales Frankston searches have increased alongside searches for Mornington Holden used cars.
Where to From Here
While some manufacturers have been optimistic about industry supply-chain issues improving in 2022, there are no clear signs of relief yet.
James Voortman, Chief Executive of the Australian Automotive Dealers Association, said we’re hopeful the semiconductor shortage will start to improve by the middle of this year. This is good news for used cars dealers Frankston and used cars Frankston. The more new cars being manufactured, the more trade-ins will occur subsequently driving down used car prices.
KPMG forecasts a 30% reduction in current prices in the US by the end of 2022 as carmakers begin delivering new cars to market. Although the report is based on the US market, the problems are global meaning we can expect to see the same results in Australia.
Advice for Customers Buying a Car at the Moment
As the prices of used cars currently remain high, customers are facing massive discrepancies between what sort of value they would expect to pay versus what sellers are asking for. When searching for second hand cars Frankston or used car sales Frankston take your time.
Sacrifice Colour or Model
For those who can’t afford to wait 12 months or more for a new car, used cars are a good alternative. However when it comes to prices, customers need to do their research, shop around and be open to passing up the exact colour or model they are after. Used car dealers Frankston can help with finding the perfect used car that meets your own individual needs.
Search for Warranty
Used cars with warranty left on them offer the best protection if something is to go wrong. At a time when prices are considerably high you want to make sure you’re well protected. When searching for your next used car look at Kia. For example, if you buy a three-year-old Kia that had a seven-year warranty as new, you’ll have four years of warranty left.
Explore used cars Mornington Peninsula and Frankston used car dealerships for a range of used cars under warranty, ready for immediate delivery. Take the second hand cars Frankston route, protect yourself and avoid the long waits.