How to navigate buying and selling in a never-before-seen car market

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Used cars are being turned over for the highest prices ever seen in Australia as the global car industry continues to rebound from its biggest disruption yet.

With prices continuing to climb, used cars cost 65 per cent more in the first three months of this year than they did in 2019, and 18 per cent more than they did at the end of 2021, according to data from Moody’s Analytics.

Some drivers are managing to sell used cars for almost as much as they bought them for years earlier, while others are paying new-car prices for well-worn vehicles.

Dan Baxter sold his ute for $1500 less than what he bought it for eight years earlier. (Nine)
“We’ve never seen anything like this,” director of content at Drive James Ward said.

“You’ve got ridiculous waitlists on even regular cars, 12- to 18-month wait-times.

“And seeing used cars actually go up in value is also something we’ve never, ever seen.

“In many cases, you’re able to sell a car that’s 18 months old for basically what you paid for it.”

Ward said certain types of cars, such as the highly sought-after Suzuki Jimny, were going for even more extraordinary prices.

He said the small four-wheel-drives were listed as worth $30,000 second-hand but had been advertised in many places as for sale at close to $50,000.

Dan Baxter, from in Ballarat in Victoria’s west, sold his ute on Facebook in February for only $1500 less than he had bought it for eight years earlier.

“I bought the 2008 Toyota Hilux in 2014 for $22,000 with 170,000km. I sold it in February 2022 for $20,500 with 225,000km,” he said.

Used cars are in high demand. (AFR)

The father believes he could have had someone pay even more for his ute if he had made more effort with the sale.

“However, to only lose $1500 on a car across eight years is pretty good,” he said.

The unprecedented prices paid on the used car market begs the questions, should people sell their cars now? And what should they do if they need to buy?

We asked Ward for his expert advice on the situation.

Why are used cars going for such high prices?

Used cars are being sold for such high prices because there is a greater global shortage of new cars than there has ever been before.

In short, the lack of cars was created because car manufacturers stopped ordering as many car parts when the COVID-19 pandemic hit, thinking sales would slow down.

However, demand for cars actually increased because people had more money to spend on cars during the pandemic, being unable to travel or spend on usual activities.

“So there was a huge amount of demand for cars and a slowdown in production,” Ward said.

The rush of people having babies during the pandemic also led to more people needing to get a new car to upsize.

Matthew, who lives near Caroline Springs, was left in exactly that situation.

“We needed to get a bigger car because we were having a baby,” he said.

“We bought a brand new Mazda CX-5 in November and had to wait until March to receive it.”

He is now trying to sell his third-hand Toyota Yaris on Facebook and has had more than 120 buyers inquire in one week.

The global backlog of car part orders was then compounded by people were working from home and ordering more computers and keyboards, leading to electronics manufacturers snapping up all the available semiconductors, which are vital parts in cars.

Car manufacturers were then left waiting for more parts to be produced to place car orders.

The market is now still working to make up the huge backlog of orders.

Should you choose now to sell your car?

Ward has cautioned anyone thinking of selling their car to make sure they have planned what they will do once it’s gone.

“If you’re selling in a high market, you’re going to buy in a high market,” he said.

He advised people who need a replacement car to lock in the price and timing of their next car before making a sale.

“It’s exactly like property, you run the risk of selling home and having to buy in a case where your net changeover is not great,” Ward said.

However, if drivers have a car they don’t need, he said now is the time to sell them.

“Because it’s never been a better market for sellers,” he said.

James Ward advises people to be very careful when buying a car at the moment. (Nine)

Advice for people buying a car at the moment

Ward has advised anyone buying a car the moment to beware of the financial dangers.

“You need to be a very, very cautious buyer, particularly when using finance at the moment,” he said.

He advised buyers pay deposits to go on waitlists to get new cars, despite the long wait times forecast.

“What might happen is if there are 10 people in the queue ahead of you, six of those people may change their mind or may decide that they’re not going to do it and all of a sudden you bump up the queue really quickly,” Ward said.

He said buying a new car would be unlikely to put drivers at risk of paying too much for the car, unlike the high risk associated with buying a second-hand car at the moment.

“With second-hand cars, we’re seeing these massive discrepancies between what is the sort of value you would expect to pay and what people are asking for,” he said.

“Drivers should be very cautious against paying more for a car than they really should be, particularly with interest rate rises going up.

“Because if the market corrects, you’re going to be in a really bad state.”

It is a seller’s market when it comes to buying cars at the moment. (The Age)

Ward said for people who couldn’t afford to wait for a new car, there were still used cars out there with decent prices for their value, but buyers needed to shop around, do their research and be open to passing up the exact colour or model they were after.

“Don’t pay over the odds,” he emphasised.

“If you’re looking at buying a car that feels expensive for what it is, don’t do it. “

Ward also advises anyone buying second-hand to look for cars that still had warranty left on them.

“If you buy a three-year-old Kia, that car would have had a seven-year warranty when it was new.

“So it means it’s still got four years of warranty left.

“They are the ones I would be looking at, because they’re the ones that you’re the most protected with, in case something goes wrong.”

He also advised anyone buying a used car to get a full service history and a certified mechanical inspection before buying.

Ward said anyone thinking of buying a car could reach out to contact@drive.com.au for some advice on what they were considering purchasing.

When are the prices of used cars expected to drop?

Ward said car experts were hoping car prices would start to return to normal in 12 to 18 months’ time.

“But we sort of said that 12 months ago, because we didn’t know that Ukraine situation was going to happen,” he said.

The Russia-Ukraine military conflict is disrupting the semiconductor market, creating further shortages of car parts.

“We are really hoping that things catch up within the next 12 to 18 months – but that’s assuming everything sort of continues on its path,” Ward said.

He said rising interest rates would help correct the market a little, reducing the number of people buying cars, particularly the more expensive ones.

“Demand will slip and people will start looking for cheaper cars,” he said.

“And we’ll start to get back into the system that we knew a couple of years ago.”

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Moody’s Analytics also forecasts that in the “near-term” used car prices are set to stay high.

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