The 2023 outlook on used car prices
The first is that new cars are in short supply and wait times for their arrival on our shores are longer than usual. The second is that used car prices are uncomfortably high. According to the Used Vehicle Price Index produced by Moody’s Analytics, however, prices were actually down 12% in December after peaking in May 2022. Unfortunately, they’re still 54% above pre-pandemic levels.
What caused the increase?
When Australians entered the first national lockdown in March 2020, used car prices crashed in anticipation of an economic disaster. They rebounded fast, however, once it became clear that global supply chains were collapsing.
Throughout 2021, the shortage of semiconductors hampered the production of new cars, which caused delivery times to blow out to 12 months for some popular models. Soon after, the war in Ukraine delivered another blow to global supply chains, creating even more disruptions.
With costs rising, manufacturers announced price increases on new cars, which forced more people into a second-hand market that was already struggling to keep up with demand. At the start of 2019, a new Toyota Corolla Ascent Sport Hybrid sold for approximately $27,700. In 2023, the same car is selling for $32,400 including on-road costs. That’s an increase of 17% over four years after an extended period of price stability.
When will things return to normal?
New car supply is expected to improve in 2023, with global production returning to 2019 levels. It will take another few years to clear the backlog of new car orders but with more new cars being delivered, more used cars become available in the used car market, which should bring their price point down a bit.
Moody’s Analytics is forecasting used car prices will fall another 10% in 2023 and then stabilise in 2024 (at higher than pre-pandemic levels). If inflation and interest rates continue to rise, though, demand could soften for new and used cars, which will see prices fall faster than the current forecast.
A good time to buy or sell?
If you can plan your next car purchase, then waiting a few more months could save you a few thousand dollars. The traditional soft period for used car prices hits after Easter when there is more stock available and fewer buyers.
If you can’t wait and need a vehicle now, shopping around will certainly help because used car dealers are keen to turn over their stock when prices are falling. If you’re buying, don’t be afraid to haggle on price.
Pro tip: Wait until the last week of the month and hope dealers are more motivated to sell to hit their targets.
Selling a used fleet car in this market should be easy if it’s been well maintained. Selling to a retail buyer will take more time, but you’ll be rewarded with a higher price. For a quick and easy sale, speak to a car dealer or used car wholesaler.
If you’ve owned the vehicle for three years or more, you’ll likely get a higher price than you expected. But remember, the longer it takes to sell, the more prices will fall. So, if you’re selling, it may be better to get the vehicle sold than haggle over a few hundred dollars.
