Seller's market for used cars

COVID-19’s effect on Australia includes an unexpected impact on the volatility of pricing and stock availability of used cars.

Research by carsales, backed up by a recent statement from Moody’s Analytics, suggests that sellers of used cars are very much in charge right now.

“Discounting [of used cars] is at unprecedented low levels,” says Jeremy Moger, Head of Commercial Insights at carsales.

“And days spent online for delisted stock [cars removed from carsales] is also really low.

“So what ever used stock dealers can get is moving quickly, with minimal if any discounting needed. It is certainly a seller’s market right now.”

Indeed, industry intelligence says many buyers are struggling to find the used vehicles they want, and if they do, they’re snapping them up without spending significant effort on haggling.

The other complexity is that many vehicle owners able to purchase a new car are retaining their existing car, which would otherwise have been traded or sold privately, for family use.

However, Moger says the market is already showing signs of adjustment with owners more confident about selling.

“New listings to the site are outweighing delistings for the first time since mid-April,” he says, “hence the slowing and reversal of inventory.”

In essence, the stock of used cars for sale at carsales.com.au has begun to grow again, and the number of vehicles ‘delisted’ (withdrawn from sale) is declining in proportion.

The seller’s market over the past two or three months will likely ease as consumer sentiment improves.

Moger’s observations are also supported by a wholesale pricing study from Moody’s Analytics.

According to the market research firm, wholesale prices of used cars during May set a new record for the Australian market, jumping 23 per cent from April to May, and then increasing again by 11 per cent from May to June.

What is staggering about the Moody’s Analytics study is that the 23 per cent increase in one month equates to the growth in wholesale pricing across the entire period from the Global Financial Crisis in 2008 and 2009 to the beginning of 2020.

Moody’s Analytics surmises that demand for vehicles (both new and used) is high due to the workers preferring to commute in a car of their own rather than risk infection while taking public transport to their place of employment.

This is a factor carsales own research has backed up.

In some good news for buyers, Moody’s Analytics projects that prices will fall over the next two quarters of 2020.

That will reflect more new cars reaching market as manufacturers re-open their production lines overseas, with a concomitant effect on trade-ins.

Unfortunately, the improved outlook for buyers will also come as a consequence of ongoing high levels of unemployment in Australia.