The good news for buyers looking for used vehicles is that prices are stabilising following quite a steep rise amid the Covid lockdown.
Cars, in general, are depreciating assets unless they are collectable items, with value negatively affected by the mileage.
Used car data from getWorth
The Covid pandemic upended this long-term trend. Factory and port closures, microchip shortages and other supply chain snarl-ups caused the supply of new cars to be severely cut back.
New car buyers then went hunting in the second-hand market, but there were only so many available used cars. At the same time, interest rates dropped sharply, making car financing more affordable. The increase in demand pushed used car prices up for the first time in at least a decade.
What has been happening since?
Car pricing experts, getWorth, says new car supply has been recovering. At the same time, interest rate increases, fuel price increases and other living cost increases have reduced affordability.
By combining live market data and Artificial Intelligence, getWorth has developed a set of algorithms to separate the effects of mileage and time.
“This allows us to compare apples with apples,” explains getWorth Chief Financial Officer Colin Morgan.
For example, the 2018 2.8 Diesel Fortuner Automatic with 60 000 km a year ago can be compared with the same car at 60 000km today – even though the 2018 models might have an extra 10 000 km to 20 000 km.
However, like-for-like price levels are now returning to near their pre-Covid levels.
The return to the old price trends does have implications for consumers as, during the post-Covid period, people got used cars retaining high levels of value or even price increases. Someone could buy and finance a vehicle with an excessive balloon payment and still have equity left over when they sold the car a year later.
The unusual market also encouraged scalping and flipping. However, those days are now over, and car buyers must ensure they buy at the right price and responsibly finance their vehicles.
