Used car prices balloon by 25 per cent in a year: analysts

Used car prices balloon by 25 per cent in a year: analysts

Used cars values have jumped by 25 per cent since the beginning of the year, a new report reveals, spurred by a drop in supply, a lift in demand and the lockdowns instituted to help contain the COVID-19 pandemic.

The surge comes after used car values increased by 7 per cent in August, according to Moody’s Analytics Price Index, lifting them to an all-time high exceeding the record set during the global financial crisis.

“There has been a shift towards personal transportation in place of ride-share services, public transportation, and air travel,” Michael Brisson, a senior economist and associate director at Moody’s Analytics, told RateCity.

“This change in preference has been in response to fear of contracting the virus or, in some cases, not wanting to deal with the hassles of increased precautions.”

Moody’s Analytics price index tracks car prices based on data from Pickles auctions.  The analysis comes as unemployment is at a 20 year high, house prices are forecast to contract and the country experiences its largest recession since the 1930s.

SUV prices rise by more than 30 per cent

Used car prices began to surge soon after the lockdowns lifted in May, according to the price index, leading to a yearly lift in passenger car sales of 23 per cent.

But falling fuel prices bolstered a rise in SUV and light truck values even more -- by 32 per cent over the previous year.

The rising values in used car prices coincides with a 29-month fall in new car sales, owed to tighter lending standards and declines in the real estate market, Mr Brisson said.

“Limited supply of what were previously new-vehicles now means fewer low-age, low-mileage vehicles available on the used market,” he said.

“Used vehicles remain a viable substitute for new vehicles when the preferred new vehicle is not available.”

Other factors contributed to the rise in values too, including dealers apparently running low on some new car stock, the extension of leases and a drop in repossessions.

“Leases were extended during the early days of the lockdown out six to 12 months, and those vehicles have not yet made their way back to the market,” Mr Brisson said. 

“Further, banks are still forgoing repossessions (as a COVID-19 relief measure), limiting another avenue for vehicles to make it into the wholesale market.”

Is now a good time to buy?

Used car prices have been surging in developed countries around the world because of the ripples the COVID-19 pandemic sent throughout the automotive world. 

Prices are expected to hold for a while, and eventually fall as more new and used vehicles are listed for sale, Mr Brisson said.

“COVID-19 related demand increases are probably limited going forward,” he said.

“Many that planned to purchase vehicles have already switched and the hope is that a vaccine or future treatment that will return mobility back to pre-pandemic trends is less than a year away at this point.”

Need a car? Here’s what to consider

The health crisis and its ongoing nature might leave people feeling more comfortable if they had a car, as opposed to catching public transport or hailing a rideshare. 

But the decision should not be taken lightly as there’s a number of factors to consider, Sally Tindall said, head of research at RateCity

“If you’re thinking about buying a car under finance, work out exactly how much you can afford to borrow, factoring in on-road costs such as rego, insurance and maintenance,” she said. 

“Also make sure you add a generous buffer into your calculations, in case of emergencies, because one thing COVID has made us realise is that we can’t predict what the future will hold.”

Holding off from buying a car might make it possible to shop around for a better deal, Ms Tindall said, adding people could make use of car sharing services such as Go Get or Car Next Door to help get them by in the meantime. 

“If your budget is tight, picking a low-cost car loan lender will also be crucial,” she added. 

“There’s no point paying north of 10 per cent on a loan if you can secure a more competitive rate from one of the lower cost lenders.”


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What is a chattel mortgage fee?

A chattel mortgage fee is an amount you’ll pay the lender to procure the funds for a chattel mortgage.

You can use a chattel mortgage to finance vehicles used for your business at least 50 per cent of the time. It’s similar to a secured vehicle loan. The lender will give you the funds required to purchase the vehicle whilst you retain the ownership. The finance company then holds a mortgage on the vehicle, using the car as the security, until you repay the loan amount. At the end of the loan term or once you’ve paid it off, the lender will release the mortgage. Alternatively, you can opt to trade-in or refinance the residual value.

What is a dealership?

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

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.

What is a chattel mortgage used for?

A chattel mortgage is usually used to buy an asset - such as a car - for your company for business use. Relatively similar to regular mortgages, a chattel mortgage structure is based on a lender providing you with funds to purchase an asset while registering their security interest on the Personal Property Securities Register (PPSR) for the life of the loan. In this case, the asset is known as the chattel. After the loan has been repaid, you will have full ownership of the asset. 

A popular finance option, a chattel mortgage is usually preferred by self-employed or small business owners, due to flexible options available for repayment. In some cases, you may get 100 per cent of the cost of the asset, which means that no upfront deposit needs to be put down.

However, it’s important to note that a chattel mortgage is not regulated under the National Consumer Credit Protection Act. It’s therefore important to seek advice about the product and fully understand the agreement terms before signing.

How to apply for pre-approval of a car loan from RACV?

If you’re planning to apply for a car loan with RACV, the best way to start is by having a clear picture of your requirements. By getting pre-approval on your car loan, you’ll be able to go shopping for your new car with a definite budget that will help you narrow your search. Once you’ve decided to buy a car with the help of a loan, you may have even identified the type of car you would like to purchase, you can seek pre-approval on a car loan from RACV. 

You can apply for pre-approval by filling out a form online and uploading the relevant documentation regarding your identification, income, debt and credit history. Once you submit your application, RACV will review and verify the documents. If you meet their eligibility criteria, you will get pre-approval for the amount they are willing to lend to you. With this pre-approval, you can go car shopping with the confidence of knowing what you can afford.

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 pre-approved for a credit union car loan?

Getting pre-approval for a credit union car loan can make the process and paperwork required to buy a car more streamlined and less stressful. You can apply for pre-approval for a credit union car loan, online or contact your credit union. You’ll be asked to provide relevant documentation regarding your income. After you submit your application, your credit union will review and evaluate it along with the documents you submitted. If you meet the eligibility criteria, your loan will be pre-approved for a specific amount.

With pre-approval for a credit union car loan in hand, you can negotiate your new car’s price with peace of mind you have the funds.

What is proof of income?

Before giving you a car loan, lenders will ask for proof of income – documentary evidence that you earn as much as you claim you earn. Lenders will typically want some combination of tax returns, pay slips and bank statements. The reason lenders want proof of income is because they want to be sure you have the means to repay the car loan.

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.

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 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.

How to get pre-approval for your ANZ car loan?

Getting pre-approval on your car loan can give you a good idea of how much you may be allowed to borrow. This will help you set your limits while selecting your car. You can apply for pre-approval for an ANZ car loan by filling out a simple online application form, where you’ll have to submit relevant identity, employment and income documentation. 

ANZ will then conduct a credit check based on your application and documentation. It’s important to note that this could have an impact on your credit history. Based on your credit and income documentation analysis, ANZ will provide an amount they are willing to give you as a loan. After this, you can find the right car that matches the proposed loan amount and send it through your final loan application. 

It’s important to remember that pre-approval gives you an indication of how much you can borrow from ANZ to purchase your car, but it doesn’t guarantee the final approval.