Used car prices in Australia jumped by 21 per cent last year with the low inventory and a continued shortage of new vehicles fuelling the rise.
In its latest report, Moody’s Analytics said prices were set to increase again in 2022 but by a more modest 3.6 per cent before they start to slip back in 2023.
“High used-vehicle prices will be supported by steady demand and a lack of new and used inventory,” the company said.
“With no way to increase the supply of used vehicles, prices will stay high in the near term.”
Australia’s new-car market was contained throughout 2021 by slow deliveries as a shortage of semi-conductors cut production across the globe.
That shortage was expected to ease in the third quarter of this year and as new car production ramps up, used car prices should cool.
“The shortage of new vehicles has occurred alongside a tightening in supplies of used vehicles – drivers are unwilling or unable to trade in their vehicles,” Moody’s Analytics said.
“Combined, these trends have created a perfect storm, manifesting as unprecedented prices.
“Auction inventories, low since mid-2020, eased further in the final months of 2021, ending the year at a record low.
“In short, car owners are sitting tight.”
The report said the local COVID-19 situation was also having an impact on used car prices, which dipped in the third quarter last year amid strict lockdowns in New South Wales and Victoria.
But when those restrictions were eased, household spending and demand for vehicles rebounded, prompting prices to jump again.