Used vehicle prices have returned to their downward path, despite a recent uptick, as the market slowly returns to normality.
Financial intelligence firm Moody’s Analytics says the decline in seasonally adjusted used vehicle prices is a result of improved new vehicle supply and tighter monetary policy.
It expects used vehicle prices will continue to fall over the course of the year as supply of vehicles improves and demand declines.
Prices in June declined to slightly below their March levels after two consecutive months of increases.
Passenger car prices were more significantly affected, slumping 3.8 per cent from May to June and down 7.9 per cent from a year earlier.
In contrast, ute and SUV prices were down 1.4 per cent from May to June, but down a more significant 15.8 per cent from a year earlier.
Prices are 13 per cent lower than their peak in May 2022, but still 54 per cent higher than the pre-pandemic level in June 2019.
Consumer demand has remained strong despite interest rate hikes, and unemployment has hovered around its lowest level on record.
New vehicle sales continue to be strong, with the Federal Chamber of Automotive Industries claiming June could have been an all-time record month had supply been able to meet demand.
Moody’s Analytics does note, however, that the heights of new car sales in June could be reflective more of orders placed in 2022 only finally getting delivered as supply chain disruptions ease.
The firm predicts stronger new vehicle supply and hawkish monetary policy will help drive down used vehicle prices.
It predicts interest rates will reach a peak of 4.35 per cent instead of the previously expected 4.1 per cent, and that unemployment will rise from 3.5 per cent to 3.9 per cent by year’s end and up to 4.5 per cent by the end of 2024.
It also predicts inflation will average 5.5 per cent this year and 3 per cent next year.
Those hoping for a rapid drop in used car prices should heed caution from Moody’s Analytics, which predicts this may come hand-in-hand with a poor Australian economy.