New car sales tumble creating bargain opportunities for buyers

New car sales tumble creating bargain opportunities for buyers

New car annual sales experienced a significant drop compared to a year earlier, an analysis of car sales found, shifting bargaining power away from dealers and towards buyers keen on snapping up a bargain.

However, one nascent category bucked the trend by trebling sales and solidifying its promise.

Car sales slumped by 20 per cent in the year ending July 2020, the analysts at IBISWorld said, continuing a 28 month streak of year-on-year losses and burning a 23 per cent revenue hole in the pockets of carmakers.

And carmakers stand to lose more money over the next year, the analysts said, as the drastic change in lifestyles spurred by the COVID-19 pandemic has resulted in people relying less on cars.

IBISWorld forecasts a drop of 4.3 per cent in revenue for the 2020 to 2021 year. This is owed to work from home arrangements undermining the traditional need to drive to an office, people forgoing spending in lieu of saving, and a rise in unemployment placing expensive car purchases out of reach for many.

The bargaining window may close

The drop in new car sales is forecast to be temporary, IBISWorld said -- eventually eliminating a window when customers would be able to negotiate prices from a stronger bargaining position. 

Sales are expected to normalise as restrictions begin to lift during the COVID-19 pandemic, the analysts said. Customers are then expected to return to showrooms with a “pent-up demand”.

The lift in demand may mean carmakers and dealers might be less likely to offer discounts or throw in optional extras.

There’s an emerging car category bucking the trend

Electric vehicle sales fended off the downturn petrol and diesel cars couldn’t thanks to new models being introduced, IBISWorld said, but adoption in Australia still trails the progress of other developed countries.

The hybridised marriage of battery technology with a combustion engine helped the category treble its sales in 2019. Toyota’s Rav4, for instance, was the top selling vehicle in July this year -- and half of all models sold were a petrol-hybrid, Ibisworld said.

But Australia has not taken to the nascent category with the same warmth as other countries. Electric vehicles only accounted for 0.6 per cent of new car sales in 2019, when their sales accounted for 2.5 to 5 per cent in developed countries

“Australia lacks a formalised national target for electric vehicle adoption,” the analysts said in a note.

“In the absence of greater incentives, the uptake of electric vehicles in Australia is likely to continue to be slow.”

The findings were consistent with an annual report released earlier this month by the Electric Vehicle Council.

The demand for cars driven by electric motors and powered by rechargeable batteries is anticipated to increase, IBISWorld said, particularly as less expensive and more diverse models enter the market. 

Lenders may reward people who buy a green car

Saving on fuel is not the only attractive perk of buying an economical, hybrid or electric vehicle. The car loans needed to purchase them may be cheaper too.

Some lenders offer green car loans that have lower interest rates than regular car loans. Others encourage the purchase of environmentally friendly cars by waiving fees or redraw charges. 

Not every lender offers a green car loan as they’re relatively new to the Australian personal lending market. Take a look at the table below to see if a green car loan could suit your needs. 

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What is a dealership?

A dealership is a car yard or a place where cars are sold.

Can you get a chattel mortgage with bad credit?

Getting approval for a chattel mortgage with bad credit may be possible, given ‘chattel’ (usually a piece of equipment or car) is put up as security for the loan. That means if you fail to repay the loan, the creditor can recover the loaned amount by repossessing and selling the car or piece of equipment. This differs from unsecured car loans, where the asset is not tied to the loan and cannot be taken if you don’t meet the repayments. 

What is dealer finance?

Dealer finance is a car loan organised through a car dealer – as opposed to car loans organised by a finance broker or directly by the lender.

How to get a chattel mortgage?

Both businesses and individuals may use a chattel mortgage, provided that the car is being used predominantly for business purposes. 

To apply for a chattel mortgage, you need to first consider your options and choose a suitable lender that meets your requirements. Once you have selected a lender, you can apply for the loan online by filling out a form. If the lender doesn’t offer an online application process, you can either call them or visit their nearest branch. 

After you’ve applied, the lender will ask you to supply documents that confirm your identification, income, job profile, etc. If everything is in order, most lenders will arrange the loan’s settlement, so all you need to do is pick up your car!

What is CTP insurance?

CTP insurance, also known as compulsory third-party insurance or a green slip, is compulsory if you want to register a vehicle in Australia. If you’re responsible for a car accident, your CTP insurance will be used to pay any compensation due to anyone who might be injured or killed. However, CTP insurance doesn’t cover you for vehicle damage or theft.

How much is your car worth?

If you already own a car, you could potentially bring down the cost by selling your car in the process. Before that happens, though, you’ll need to find out how much your car is worth.

One of the first places to find this value is to research the value of your current car, giving you an idea of roughly how much it’s worth in its peak condition.

There are plenty of websites that offer a free online valuation, allowing you to enter your car’s make, model, year, badge and description, with results listing a price guide based on both selling your car privately and through a dealership.

Of course, dealerships will try to profit on your trade-in by buying it for less than they can sell it, making it highly unlikely that you’ll get the same price selling a car to a dealer as you would selling a car privately.

However, private car sales can be costly and can take months to sell, making car trading more convenient with a guaranteed return, even if you may not be able to realise the total value of your car’s worth.

Remember that everything is negotiable. If the dealership is offering you less for your trade than you wanted, try to negotiate elsewhere to gain that money back. Start by negotiating on the price of the trade and then ask them if they can give you a further discount on your new car.

What is a car loan?

A car loan, also known as vehicle finance, is money that a consumer borrows with the express purpose of buying a vehicle, such as a car, motorbike, van, truck or campervan. Car loans can be used for both new and used vehicles.

How much is my car worth?

If you own a car, it may be something that can help you bring down the cost of your next vehicle purchase through its sale. However, before you can do that you’ll want to find out how much your car is worth.

Your car’s worth can depend upon various aspects, including:

  • Age
  • Condition
  • Model and make

A great starting place for aspects of this includes websites that offer online valuations, allowing you to enter your car’s make, model, year, badge and description, with the listed results displaying a price guide based on both selling your car privately and through a dealership.

Both have pros and cons, as cars can be very profitable, something that will no doubt impact any chance you have to make the most of your car’s value upon sale. Dealerships will try to profit on your trade-in by buying it for less than they can sell it for, so you shouldn’t expect the same price selling a car to a dealer that you would necessarily get selling a car privately.

What is depreciation?

Depreciation is the reduction in the value of your car. Almost every car loses value each year, although at different rates. As a guide, cars depreciate on average by 14 per cent per year in the first three years and then eight per cent per year after that.

Can I buy a car as a student?

Buying a car is a huge financial decision, and shy of marriage and purchasing a house (or perhaps around the world travels), it may be the biggest financial decision you make. But if you’re looking at your empty pockets, don’t despair! Your dream of owning your own car could become a reality, if you look for and compare the right car loans for your circumstances.

What is resale value?

The resale value is the price you could realistically charge if you were to sell your car. Almost every car loses value each year, although at different rates. As a guide, cars depreciate on average by 14 per cent per year in the first three years and then eight per cent per year after that.

What is an LVR?

The LVR, or loan-to-value ratio, is a percentage that expresses the amount of money owed on the car compared to the value of the car. For example, if you take out a $15,000 loan to buy a $20,000 car, you have an LVR of 75 per cent. LVRs change over time as you pay off your loan and your car depreciates in value. For example, two years later you might now owe $10,000 on your car, which might now be worth $15,000. In that case, although there would still be a $5,000 difference between the size of the outstanding loan and the value of the car, the LVR would now be 67 per cent.

What is a guarantor on a car loan?

A guarantor on a car loan is a third party, usually a relative or friend, who guarantees to meet the repayments of a loan for the purchase of a car, if the borrower/owner of the car defaults on the loan.

Guarantor car loans can be useful for people who would otherwise struggle in being accepted for credit to purchase a vehicle. These may include people with bad credit, students and young people who may have no credit history, as well as some pensioners.

Many lenders offer guarantor car loans, guarantor personal loans and guarantor home loans, because of the significantly reduced risk to the lender.

How much can I get towards a new car as a single parent?

It really depends on your financial circumstances as to how much a lender will grant you towards a new car as a single parent. With most lenders, the smaller the loan you apply for, the higher your chances are of approval, so getting a cheaper car or adding some savings of your own, may be a valid option if you are struggling for approval on a car loan.