Used cars – hot demand drives cost spike


Popular with retirees, the humble used car may now be out of reach. Why?

Key Points


  • Price of second-hand cars has jumped 36%
  • COVID-19 has disrupted production of new cars, with flow on to used car market
  • Price spike could continue for another year 

Not long ago you had trouble giving them away. Today, thanks to the pandemic, second-hand vehicles are 36% more expensive than a year ago. 

Traditionally, retirees have been keen buyers of second-hand cars, either out of budget concerns or as a second ‘around-town’ car.

But that’s changed in 2021 and it’s the usual issue of supply and demand, super-charged by COVID-19 - and it’s unlikely to change anytime soon.

Issues with new car production


World manufacturers are struggling to fill orders for new cars because of supply chain and manufacturing disruptions due to the pandemic. On top of that, there’s a shortage of semi-conductor chips from Asian producers. Factories have shut down and production schedules interrupted.  

News reports say Australian new car buyers are having to wait for months, resulting in them hanging on to their cars beyond what they normally would do. That means there are less used cars on the market.

Businesses are also holding onto their fleet vehicles longer, apparently so workers can comply with social distancing in vehicle policies, rather than having four people in a car. 

Moody’s Analytics senior automotive economist Michael Brisson is reported in the media as having said the January jump of 35.8% was the biggest on record.

“You have the perfect storm that’s continuing to drive the market,” he said.

The pandemic has caused a sharp rethink by many commuters who didn’t want to take public transport, Mr Brisson said. The chip shortage in the auto industry globally was now causing fresh spill-over effects.

“It’s really bringing the semi-conductor pipeline to the brink,” he said.

The Australian Financial Review reported that General Motors in the US announced it was cutting back production at three plants because of the semiconductor chip shortage.

Volkswagen has signalled it expects chip supply to be “tight” until June.

James Slattery, a director of national auction house Slattery Auctions, which handles up to 10,000 used car auctions annually, said all the segments of the used car market were performing strongly, but late-model higher-priced cars were particularly strong.

“People are saying they just don’t want to wait until May or June for a new car,” Mr Slattery said. 

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