'Sellers will be disappointed': Experts predict used car prices in 2025

01/02/2025 12:12 AM

If you've been planning to buy a used car but have been holding off, 2025 might be the year to do it – with experts predicting it's going to be a buyer's market.

It's a trend we've started to see forming over the last few months, with demand for used cars cooling compared to the peaks seen during 2021 and 2022 with the COVID-19 pandemic.

Last month used-car sales declined by 2.3 per cent to 197,652, while the number of cars listed for sale increased by 5.4 per cent to 335,148.

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And it's a problem felt across not just petrol and diesel cars, but electric ones too, with EVs experiencing the largest drop in sales – down 8.3 per cent – followed by plug-in hybrids which are down 7.4 per cent.

Why? There are many reasons, but causes include an abundance of new brands entering, or about to enter, the market (predominantly from China) and aggressive discounting on new cars – especially electric ones.

We sat down with James Voortman, the Chief Executive of the Australian Automotive Dealers Association (AADA), to find out what anyone buying or selling a used car in 2025 needs to know.

Used car price predictions for 2025…

Ongoing oversupply

"I think what we’ll see in 2025 is the ongoing oversupply of new cars that just flows on into that used-car market," said Voortman.

"It just means that people will take up [the new car] deals that’ll be on offer, and be disposing of any used cars. 

"What we’ll see is what we’ve probably been seeing a bit in the last few months, which is an increase in cars being listed for sale at a higher rate than cars being sold."

A good time for buyers then, with lots of choice on offer and lower prices too, but Voortman says anyone trying to sell a used car is "going to be disappointed" – with the trend of retained values already going down likely to continue.

"Something we’ve seen for the past year is those retained values are still coming back from those highs we had during the pandemic," he said.

"And I think also with the oversupply of new cars, we’re going to see a lot more demonstrators entering the market, which again, affects retained value. 

Bargains for consumers

"So the used-car market is probably going to be about bargains for consumers. [For sellers] depending on the make and model, cars will probably be a bit slower to move and there’ll probably be more price reduction [needed]. In a nutshell, I think it might be a buyer’s market,” Voortman said.

"I think a lot of people will still be operating in the environment that they had two years ago, where their vehicles were sort of holding their value very well and they were getting good prices for them. But I think a lot of those people are going to be disappointed given where our retained values have gone."

Retained values have steadily declined during 2024, with almost every vehicle segment experiencing a drop in value in November – except for passenger vehicles aged two to three years old.

Toyota leads the way in value retention for the passenger segment, with the Corolla keeping 94.6 per cent of its original value in the 2–4 year-old category and the Yaris 95.3 per cent in vehicles aged five to seven years old. 

For SUVs, the Suzuki Jimny is the vehicle that keeps its value best both in the 2–4-year-old and 5–7-year-old categories at 111.3 per cent and 110.1 per cent respectively.

It is the same story when it comes to used EVs too, with sales of vehicles in the five-year-old category declining by 4.7 per cent to 48.5 per cent in November compared to October.

Overall, the Ford Ranger remains Australia's best-selling used car, followed by the Toyota HiLux.

Although they may seem independent of one another, the new- and used-car markets are intertwined with buying patterns of new cars affecting how people buy and sell their existing vehicles – due to factors such as the cost of living which drive buyer behaviour.

New-car sales also declined in November for the fourth month in a row – and fifth time in the last six months – despite deliveries being up 1.7 per cent year-to-date compared to the same time in 2023.

In November the top-selling cars were the Toyota RAV4 mid-sized SUV and Ford Ranger ute.

In total in 2023 there were a record 1.22 million cars sold.

Dealers to pivot from new to used

According to Voortman, dealers are expecting 2025 and the next few years beyond to be a tough time – and we should expect a change in focus to used cars as they use them to increase their profitability.

"I think all dealers are going to look towards used cars as a way to stem what will be much lower profitability in the new car sector because of the oversupply," he said.

"I’ve seen a number of the listed firms already go on record saying one of the ways we’re going to counter the loss of revenue from the situation in the new-car market is to apply more focus on used. 

"So they have to get better, they really have to try and increase the number of vehicles that they are listing for sale. There are still more vehicles being listed by private people than there are from dealers.

"If you think what the next five years look like with the rise of Chinese brands putting pressure on those legacy brands and pressure for the Australian arm from their head offices to hit certain numbers, I think that’s going to filter down to the dealerships. 

"The landscape for franchising is tough at the moment. The reality is whenever manufacturers are sort of under pressure themselves, they will then attempt to shift some of the risk.

"They’ll attempt to use their dealers as a mechanism to absorb all of that excess stock and they’ll resort to numerous tactics like unrealistic targets, stocking targets.

"The problem with the high-stock environment we have now is we had this five years ago in 2019 – there was a lot of stock and there was a lot of discounting in dealers. They were struggling to make a profit. 

"The difference this time is that not only are they going to have a lot of stock and struggle to make a profit, they’ve also got very high expenses, such as interest rates, which really affect dealers because they’re financing all of that stock on the showroom floor.

"Labour has just constantly gone up as well, and they can’t really change what they charge their customers because of cap-priced servicing, insurance costs, all of that.

"Dealers have seen periods of crisis before and by and large they’ve done a really good job at overcoming them, but we are seeing some businesses decide that it’s time to exit and sell to the larger players and so forth. So it really is going to be a difficult few years."

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