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Why Are Used Car Prices So High In Australia?

Controversial  ·  April 19, 2021

Why Are Used Car Prices So High In Australia?

There's a big market for used cars in Australia and for good reason. As more people upgrade to the latest models to come out of the factory, they unload their used vehicles on the secondary market. What do the buyers get? They get cars with plenty of value left to offer but at a significant discount.

At least, that used to be the case. For quite a while now, used car prices during the pandemic have been rising, so much so that many people lament that second-hand vehicles aren't so cheap anymore. It might even be worth to save up a little and buy a brand new car rather than a used one in some cases.

So, what’s causing this price increase? Well, as you might have guessed, most of it does come as a result of the pandemic. That’s why many refer to the increased prices as the ‘COVID tax’. Yet, those aren't the only reasons.

In the following sections, we're going to examine why used cars are getting pretty pricey in 2021.

Why Are Used Cars So Expensive In Australia 2021?

There are several reasons why used cars are getting so expensive in Australia in 2021. Generally, you can group those reasons into two categories: pandemic-related and non-pandemic related reasons.

Let’s take a closer look to help you understand what’s going on.

‘COVID Tax’ and Pandemic-Related Reasons

The pandemic continues to rage on, more than a year since it started. That has affected the used car industry in three ways: fear of using public transportation, supply chain issues, and change in tourism habits.

1. Fear of Using Public Transportation

People have become wary of being in crowded and enclosed spaces. That includes trains and buses as well. As a result, an increasing number of people choose to forego using public transportation in favour of driving their own car.

Even though used car prices are climbing in Australia, they're still more affordable for many people when compared to the price of a brand new vehicle. Dealers see an increased demand for the cars on their lot, which means that they can get away with price increases as well. 

2. Supply Chain Issues

Even though the global supply chain has somewhat recovered from the drop in 2020, there is still a shortage of new vehicles entering Australia in 2021. Many newer models slated to arrive by now have been delayed, leaving buyers with fewer options.

While some people might choose to wait for those models to come out, many will decide on buying used vehicles instead.

And, as you’ve seen it mentioned many times in this article, whenever demand goes up, so do prices!

3. Change in Tourism Habits

The pandemic has shown everyone just how intense the human itch for travel is. Many former travellers are frustrated about not being able to get on a plane. Therefore they're choosing to satisfy their wanderlust on land instead. 

Plus, as mentioned earlier, many people are not keen about getting in an enclosed space with strangers, including airplanes and buses.

All of that has shifted many Australians' tourism habits. So, rather than wait indefinitely to fly to traditional tourist destinations, many Aussies are investing in used vehicles to take long road trips instead.

In a way, this is a fantastic turn of events for land-based transportation. Unfortunately, it’s also a significant reason why the prices of used cars in Australia have increased so much.

Non-Pandemic Related Reasons

As you can see, the pandemic has already provided a handful of reasons why used cars in Australia have become so expensive. But that's not all. There are a couple more reasons for the increase, and they have nothing to do with the pandemic at all.

Firstly, it's the demand for discontinued car models which you can only buy as used vehicles. Plus, it's also the fact that cars these days are designed and built much better.

1. Demand for Discontinued Models 

Australian car lovers have seen many losses over the past few years. The kinds of vehicles they’d love to own have suddenly become unavailable, such as when the manufacturer went out of business or moved elsewhere.

Among them are Holden models, rear-wheel-drive sedans, and cars with V8 engines, to name a few.

The simple truth is that many types of cars have been discontinued, leaving Aussies with unsatisfied demand. Where can they go to satisfy those unmet demands? Well, they can buy those models on the used car market instead.

This is another fantastic example of 'supply vs demand'. Take your average Holden model, for instance. While there was still a demand for that car, the supply for brand new versions was non-existent.

The result? Even higher prices for used Holdens than ever before.

2. Better Cars Overall 

Lastly, here's one more reason behind the increasing used car prices during the pandemic, which almost everyone tends to overlook. The simple fact is that cars these days, and those produced in the past five or so years, are excellent cars.

Think about it. These cars that end up on the second-hand market are chockfull of safety and security features. Plenty of them even have driver-assist features, even if only the basic version.

Besides that, cars produced in the past few years are also eco-friendlier and much more fuel-efficient than older models. To top it all off, they're well-built with a much longer shelf life, too.

So, despite being a used car, many of the vehicles you find at a second-hand dealer have plenty of value to offer. Plus, you can expect them to last a lot longer, too.

If you’re in the market for a used car, check out these models that we reviewed in the past.

By Ray Hasbollah

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