Used car prices are holding strong… for now

Used vehicle prices ticked up slightly during May, but they’re still noticeably lower than 12 months ago and are expected to continue to fall.

A report from financial intelligence company Moody’s Analytics found used vehicle prices increased 2.17 per cent from April to May, or 2.6 per cent for utes and SUVs and 1.5 per cent for cars.

It’s the second consecutive quarter where seasonally adjusted used vehicle prices have increased.

This corresponded with a record month for new vehicle deliveries, though the Federal Chamber of Automotive Industries noted a significant portion of vehicles delivered in May had been ordered back in 2022.

Used vehicle prices were still 9.3 per cent lower than their peak in May 2022: cars were down 5.6 per cent, and utes and SUVs down 17 per cent.

Moody’s Analytics reports prices are expected to fall a further 12 per cent this year and 7.6 per cent in 2024 before stabilising in 2025.

It warns that while demand for new and used vehicles is high, unemployment low and Australians resilient to interest rate hikes, there are clouds forming.

Specifically, unemployment is slowly rising and early signs are appearing of a slowdown from interest rate hikes. The firm also expects the Reserve Bank of Australia will keep rates steady this year and, by early 2024, rate cuts will be needed to support the economy.

“If global economic malaise causes the Aussie economy to perform worse than expected, drastic declines in demand will push prices down further and faster than expected,” said Moody’s Analytics associate economist Catarina Noro.

“On the other hand, the risk has increased that demand may not cool as quickly as expected, keeping used-vehicle prices higher for longer.

“The rate of price declines has slowed dramatically, and the supply of new vehicles remains constrained. Additionally, rising new-vehicle prices are making used vehicles more attractive than they were a year earlier.

“If production and imports of new vehicles do not keep improving, the expected fall in used-vehicle prices could be shorter and shallower than expected.”

Increasingly improved new vehicle supply is expected to relieve some pressure in the used vehicle market.

Vehicle production in Japan is up 22.8 per cent since last year (if still 21 per cent below 2019 levels), while Chinese automotive production was up 15.3 per cent in March compared with the prior year.