Used car prices fall, but one vehicle type plummets faster than the rest
09/06/2024 02:00 AM
Now is the time to buy a second-hand ute or SUV, as used car buyers move away from heavier, less fuel-efficient models.
New data shows Australian buyers are favouring light, fuel-efficient used cars over heavy, thirsty second-hand models like utes and SUVs, amid dwindling consumer confidence and eroded disposable incomes.
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As a result, utes and SUVs are losing their value on the used market more rapidly than light vehicles, according to an August 2024 analysis from global data firm Moody’s Analytics.
“Since 2022, heavier, less fuel-efficient vehicles have depreciated more than their lighter, more fuel-efficient counterparts. The value of passenger cars has been much more resilient in the resale market, and we have been seeing this trend in both the United States and Australia,” Catarina Noro, Associate Economist at Moody's Analytics, told Drive.
"In Australia, used light vehicle prices are currently still 49 per cent higher than before the pandemic, in contrast to trucks and SUVs, which are just 21.1 per cent higher.
“This discrepancy can be attributed to an undersupply of new lighter vehicles during the semiconductor shortage when manufacturers prioritised larger, more profitable vehicles.”
Additionally, Noro said, while fuel prices are no longer at their peak, they’re still higher than they were before the pandemic, prompting consumers to prioritise lighter vehicles that will cost them less at the bowser.
Are used car prices coming down in Australia?
After recording a small rise in July, Australian used-vehicle prices returned to a downward trend in August 2024, with all vehicle types recording a decline according to Moody’s Analytics.
These price falls are largely to do with expanding new-car production after Chinese production increased by 11.6 per cent and Japanese production increased by 18.2 per cent in 2023.
Moody’s Analytics predicts a continued gradual decline in Australian used-car prices throughout the remainder of 2024, “however, the overall pace of price drops will be slower than in 2023,” Noro said.
“An extended period of high interest rates could further diminish demand by increasing the cost of auto loans. On the other hand, recent tax cuts and cost-of-living supports could have a stronger-than-expected boost in demand, putting upward pressure on prices.
“Finally, any further disruptions in the supply chain or intensification of geopolitical risks could lead to price increases. Such adjustments would impact not only the new-vehicle market, but likely would also have a cascading effect on the used-vehicle market.”
The latest Moody’s Analytics data is reflected in the most recent Australian used-car sales data from July 2024, which shows passenger cars like the Toyota Corolla, Toyota Yaris and Kia Picanto tend to retain their value better than SUVs like the Nissan Patrol, Toyota LandCruiser and Jeep Wrangler.
According to July 2024 used car sales data from the Australian Automotive Dealers’ Association, passenger vehicles between two and four years old have an average retained value of 82.1 per cent, while SUVs of the same age retain 76.3 per cent of their value and utes retain 77.8 per cent of their value.
The term ‘retained value’ indicates how much of the vehicle’s initial purchase price it would recoup if sold today on the second-hand market. For example, if a 2022 SUV priced at $60,000 has a retained value of 80 per cent after two years, it would be worth $48,000 on the used market today.
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