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Yes, it’s ok to buy a used car during COVID-19 lockdowns

Industry experts have issued statements reminding the public that it is ok to buy or sell a used car during the nationwide COVID-19 lockdowns.


While most of the attention and news reports have highlighted new-car showrooms and workshops being allowed to remain open as an essential service – particularly for repairs, recalls and warranty work – there has been confusion around the legalities of buying or selling used cars.

Used cars account for about two-thirds of all motor vehicles purchased – the remaining one-third, new cars, account for about 1 million transactions a year.

 

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Many new-car dealerships have adjacent used-car lots, but private buyers and sellers are also allowed to trade vehicles as long as social distancing rules are applied by both parties during test drives and the transaction process.

The boss of the Australian Automotive Dealers Association (AADA), James Voortman, told CarAdvice: “People are allowed to buy new and used cars … especially at a time when many people don’t want to take public transport – a bus, a train or a ride-share service – as they isolate themselves from the risk of contracting (the coronavirus).”   

A statement from the Federal Chamber of Automotive Industries said: “Since the onset of the (COVID-19) pandemic, personal transport has increased in importance as it provides a secure, socially-distanced manner of commuting to important engagements, such as health care appointments, shopping for essential items, or travelling to work.”

 

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However, the industry is increasingly unsure what value to place on most used cars. The value of trade-ins has been dented in recent weeks as wholesalers take a cautious approach to what they think a used car might be worth when reselling it.

Many finance companies have tightened lending criteria and an increasing number of loan applications are being knocked back.

While many in the industry predicted a boom for used cars during the COVID-19 lockdowns – as people downsized or switched to a more affordable vehicle – most areas of the automotive trade have taken a hit.

A report in US industry journal Automotive News overnight said the value of used cars in North America “are down significantly in the span of just a few weeks”. 

“It’s left dealers wrestling with how to handle trade-ins and at what volumes to stock their lots in the coming weeks,” Automotive News reported.

“Many dealers are approaching trade-ins with caution, given collapsing retail demand and dropping wholesale prices,” the report added.

 

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In Australia, car dealers are being equally cautious and offering conservative estimates on trade-ins.

It means buyers have the upper hand in both the new- and used-car markets – providing they can access cash or finance – however those wanting to trade-in may find the value of their old car is not worth as much as they'd hoped.

“Dealers are doing everything they can to stay open, rotating staff on shifts, forcing some to take annual leave, or letting some staff go,” said one industry veteran who is now a used-car wholesaler.

“The problem is the number of buyers out there has almost come to a stop. Many people don’t realise it’s ok to buy a used car or don’t have the money at the moment because they’ve lost their job, or scared they’re going to lose their job,” the industry insider said.

In the meantime the Australian car industry is already predicting a turnaround from mid May onwards, buoyed by the end of financial year sales.

June is historically the biggest month of the year for new-car sales; although an increase on last year’s figure is unlikely, many in the industry are forecasting a more modest decline than in April and May.

Joshua Dowling

Joshua Dowling has been a motoring journalist for more than 20 years, spending most of that time working for The Sydney Morning Herald (as motoring editor and one of the early members of the Drive team) and News Corp Australia. He joined CarAdvice / Drive in 2018, and has been a World Car of the Year judge for more than 10 years.

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