Used-vehicle price gains in Australia finally took a breather in the third quarter. Prices dropped in August and September, the first month-over-month drop since April 2020 says Moody’s Analytics senior economist Michael Brisson.
According to the Datium Insights-Moody’s Analytics Price Index, used-vehicle prices have fallen by almost 5% since the peak reached in July. Still, prices remain 11% higher than last September and 36% higher than before the COVID-19 recession.
Brisson says prices have dropped faster for passenger cars compared with trucks/SUVs/utes. Passenger car prices have dropped by more than 4% whereas larger vehicles have dropped by slightly less than 3% since July.
He says prices remain elevated for both segments, with cars up 35% since the pandemic started and utes gaining 39%. The strength of utes is being propelled mainly by a dearth of inventory for larger vehicles. A lack of inventory has kept prices steady despite headwinds from rapidly rising fuel prices.
According to the Moody’s Analytics Autocycle residual value forecasting tool, a 2020 Toyota Hilux that has been driven 15,000 km per year starting in January 2020 is worth the same amount today as the day it was driven off the dealer’s lot.
Still, the recent price drop across segments is a welcome reprieve from the exorbitant levels consumers continue to experience says Brisson.
“Nevertheless, the root of the pullback in prices is more cause for alarm than reason for celebration. extended lockdowns in the states of New South Wales and Victoria sent consumer activity into a tailspin,” Brisson says.
“The trend of consumer sentiment is down a little more than 8% from the recent peak last April but remains above pre-pandemic levels. Consumers have also remained willing to go out and purchase new vehicles. New-vehicle sales have dropped into the range of late 2019 but nowhere near the pullback of early and mid-2020.
“Still, vehicle sales over the last quarter remain below the long-run trend as new inventories remain limited with manufacturers throttled by the global electronic semiconductor shortage.
“The limited number of new vehicles sold has translated into fewer used vehicles available. For every vehicle not bought, there is one fewer traded in. Additionally, the lost km driven because of lockdowns and work from anywhere have caused less need to turn over fleets and purchase new inventory.
“Auction inventories have remained low since the second half of 2020. With high used-vehicle valuations and limited inventory for new and used vehicles compared with normal functioning markets, consumers and sellers alike are keeping a tight grasp on the vehicles they have.
“Barring any unforeseen setback in the Australian economy, prices will remain well-supported by steady demand and a lack of inventory on the new- and used-vehicle market.
“Used-vehicle prices are expected to move sideways until midway through 2022 when the new-vehicle market’s supply-chain issues have been worked out. Until then, elevated used-vehicle prices will continue to be the somewhat new normal,” he says.
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