USED cars, in recent times, short up in value even though they depreciate as they build up mileage and get older.
The Covid-19 pandemic overturned this long-term trend as factory and port closures, microchip shortages and other supply chain issues caused the quantity of new cars to be severely cut back.
New car buyers then went hunting in the second-hand market, but there were only so many used cars to go around.
At the same time, interest rates dropped sharply, making financing a car more affordable. The increase in demand pushed used car prices up for the first time in at least a decade.
According to getWorth, the supply of new cars has been recovering while at the same time, interest rate increases, fuel price increases and other living cost increases have reduced affordability. This reversed the post-pandemic situation.
“Only now are like-for-like price levels returning to near their pre-Covid-19 levels,” said getWorth CFO Colin Morgan.
“That doesn’t mean your car is worth the same today as it was when Covid-19 hit; you would have been adding mileage, which adds another layer of depreciation,” he said.
“The return to the old price trends does have implications for consumers. During the post-Covid-19 period, people got used to the idea that cars retained high levels of value or even increased in price. Someone could buy high, finance a car with a big balloon payment and still have equity left over when they sold it a year later,” he added.
You must be SIGNED IN to read comments
However, those days are over and buyers need to be careful that they are buying at the right price and financing in a responsible manner.
