Used cars are increasingly hot property in Australia, with a new report recording a 30 per cent surge in prices since April as buyers rush to avoid public transport and new car dealers face stock shortages.
According to data from Moody's Analytics, July used-vehicle prices broke records for a second month running, recording a 16.2 per cent rise on pre-pandemic prices and a whopping 30.8 per cent increase on prices during the April 2020 slump.
"To put that in perspective, used-vehicle prices rose only 23 per cent from the depths of the 2008-2009 global financial crisis to the beginning of 2020," Moody's Analytics said in its July report.
That means if you were planning to spend $10,000 on a Ford Ranger over the 2019-20 summer holiday period, you'd now be paying $1600 more for the same vehicle.
An avoidance of public transport paired with new-car stock shortages has seen consumers rush to get their hands on a fast, affordable and temporary transport solution.
"The scale of the supply shortages differs among brands and it differs among models, but many dealers are still reporting shortages and delays," James Voortman, CEO of the Australian Automotive Dealer Association (AADA), explained.
Additionally, domestic air travel declined by 92.6 per cent in May, meaning many interstate travellers decided to take to the road for their family holidays and business trips.
As a result, demand for used cars has outweighed supply, making low-age, low-mileage vehicles harder to find and pushing wholesale prices up across the board.
"Low-age used cars have become scarce as a result of businesses or rental companies holding on to their current vehicles," said CJ Jayasinghe, CEO of Westside Auto Wholesale.
"Currently our industry is seeing demand greater than supply, and as such prices have adjusted accordingly in the affected models."
Modern classics also reap the benefits
The surge has also extended to the price of classic cars, with a late-July online auction conducted by Grays fetching a total of $816,527 for its top five cars and generating a never-before-seen 1,281,007 page views from interested shoppers.
Among the heavy hitters was a 1973 Ford Falcon XA GT RPO 83, which fetched an astonishing $300,909 at auction.
"Our most recent classic car auction achieved some amazing results for our vendors," said Rian Gaffy, Classic Car Specialist at Grays.
“The results of this auction demonstrate that even in the midst of difficult times during the COVID-19 pandemic, quality classic vehicles remain in high demand and hold their value with car enthusiasts and collectors."
Christophe Boribon, National Auctions Manager at Shannons Auctions, has also witnessed a consistent demand for classic cars since the company shifted solely to online auctions.
"We've only done one online auction, but the clearance rate was 4 per cent higher than our usual live auctions, with 98 out of 100 lots selling," Mr Boribon said.
"We haven't seen an increase in prices of classics but rather a strong level of enquiry coming through. The restrictions on travel have meant enthusiasts are using the time and money they've saved from not going overseas to finally pursue their passion or embrace their car project."
Mr Boribon said he's also noticed a "you only live once mentality" emerging in buyers as a result of the pandemic.
"The pandemic has really made people reassess their lives and many enthusiasts have made decisions to do things now, rather than putting them off to a later date, because they don't know how long they'll we'll be in this situation," he said.
Where to from here?
According to Moody's Analytics, it's best to "expect the unexpected" when it comes to how used and new car prices will fluctuate for the remainder of 2020.
"Prices for 2020 likely peaked in July, but will remain elevated compared to 2019," the firm said in its report.
However, used vehicle prices are expected to soften over the coming months as more sellers enter the market to take advantage of high prices – thereby easing supply constraints – and demand is expected to remain "muted" due to waning consumer confidence.
Additionally, the used car surge could actually have a beneficial effect on new car sales, with many shoppers turning their attention to new stock as used cars become increasingly expensive.
Mr Voortman from the AADA added that new car stock shortfalls are expected to improve in coming months, explaining: "Dealers are working closely with manufacturers to remedy the situation and we expect these stock shortages will improve in the coming months."
The only factor that could prevent this regeneration of the new-car market would be a re-strengthening of the Japanese yen and Korean won versus the Australian dollar, Moody's Analytics explained.
"Most vehicles in Australia are imported from either Japan or Korea. If currencies were to appreciate considerably as they did in March, this would make new vehicles more expensive compared with the used-vehicle market."