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USED-CAR prices in Australia fell in August and September, becoming the first month-on-month decline since April 2020, according to the latest Datium insights-Moody’s Analytics index.

Vehicle prices are down almost five per cent since the peak in July, it said.

“However, prices remain 11 per cent higher than last September and 36 per cent higher than before the COVID-19 recession,” the report said.

The Moody’s Analytics Autocycle residual value forecasting tool shows that a 2020 Toyota HiLux that has been driven 15,000 kilometres a year starting in January 2020 is worth the same amount today as the day it was driven off the dealer’s lot.

In the report, Moody’s associate director and senior economist Michael Brisson said prices have dropped marginally faster for passenger cars than they have for SUVs and utes.

“Passenger car prices have dropped by more than four per cent whereas larger vehicles have dropped by slightly less than three per cent since July,” he said.

“However, prices remain elevated for both segments, with cars up 35 per cent since the pandemic started and utes gaining 39 per cent, with the strength of utes propelled mainly by a dearth of inventory for larger vehicles,” Mr Brisson said.

He said that a lack of inventory has kept prices steady “despite headwinds from rapidly rising fuel prices.”

Mr Brisson said the recent price drop was “a welcome reprieve from the exorbitant levels consumers continue to experience.”

But it may not all be good news. Moody’s reports that the reason for the price fall “is more cause for alarm than reason for celebration” because extended lockdowns in NSW and Victoria sent consumer activity into a tailspin. 

It said that the limited number of new vehicles sold has translated into fewer used vehicles available and “for every vehicle not bought, there is one fewer traded in.”

“Additionally, the lost kilometres driven because of lockdowns and work from anywhere have caused less need to turn over fleets and purchase new inventory,” it said.

“Auction transaction data shows auction inventories have remained low since the second half of 2020. 

“With high used-vehicle valuations and limited inventory for new and used vehicles compared with normal functioning markets, consumers and sellers alike are keeping a tight grasp on the vehicles they have.”

Mr Brisson summarised by stating that in general, the Australian economic recovery remains “in a vulnerable position.”

“Even though community transmission of COVID-19 continues, NSW and Victoria have emerged from an extended lockdown following vaccine mandates being satisfied. 

“The recovery path of these states, which combined, account for around half of the Australian economy, is highly uncertain.”

He said that used-vehicle prices have moved quickly throughout the pandemic with an upward trend since the dramatic change in prices in March and April 2020.

“The two-month price decrease of August and September is not a harbinger of sustained downward movement in the near term,” the report said.

“Barring any unforeseen setback in the Australian economy, prices will remain well-supported by steady demand and a lack of inventory on the new and used-vehicle market.” 

Mr Brisson said the reasons include the fact Australians are likely to remain wary of public transportation as community transmission picks up following the end of the lockdown, pushing up additional demand for private transportation. 

“Used-vehicle prices are expected to move sideways until midway through 2022 when the new-vehicle market’s supply-chain issues have been worked out,” he said. 

“Until then, elevated used-vehicle prices will continue to be the somewhat new normal.”

By Neil Dowling

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