Used vehicle prices rose slightly in May, but they are still lower than 12 months ago and are expected to continue to fall.
A report from financial intelligence company Moody’s Analytics found that used vehicle prices rose 2.17 percent from April to May, or 2.6 percent for vehicles and SUVs and 1.5 percent for cars.
It was the second consecutive quarter in which seasonally adjusted used vehicle prices have increased.
This matched a record month for new vehicle deliveries, although the Federal Chamber of Automotive Industry said the majority of vehicles delivered in May were backordered for 2022.
Used vehicle prices are still 9.3 percent lower than their peak in May 2022: cars are down 5.6 percent, and cars and SUVs are down 17 percent.
Moody’s Analytics reports prices are expected to drop another 12 percent this year and 7.6 percent in 2024 before stabilizing in 2025.
It warns that while demand for new and used vehicles is high, unemployment is low and Australians are resilient to rising interest rates, there are clouds forming.
In particular, unemployment is rising slowly and early signs point to a slowdown in interest rate hikes. The firm also expects the Reserve Bank of Australia to keep rates steady this year and, by early 2024, rate cuts will be needed to support the economy.
“If the global recession causes the Aussie economy to perform worse than expected, a drastic drop in demand will push prices down further and faster than expected,” said Moody’s Analytics associate economist Catarina Noro.
“Instead, the risk has increased that demand may not cool as quickly as expected, keeping used vehicle prices higher for longer.
“The rate of price decline has slowed dramatically, and the supply of new vehicles remains constrained. In addition, the increase in the price of new vehicles makes used vehicles more attractive than the previous year.
“If new vehicle production and imports do not continue to improve, the expected fall in used vehicle prices may be shorter and shallower than expected.”
An improving supply of new vehicles is expected to ease some of the pressure in the used vehicle market.
Vehicle production in Japan increased 22.8 percent from last year (if still 21 percent below 2019 levels), while China’s automotive production increased 15.3 percent in March compared to the previous year.