Australians are once again buying used cars as prices ease from pandemic highs, according to new data that suggests it might now be a buyers’ market.

Used car sales spiked 11.6 per cent in July to 214,588, following a period of significant price drops in recent months, according to data released on Friday by the Automotive Dealers Association.

Separate data revealed new car registrations increased by 2.7 per cent in July, following a 4.2 per cent plunge in June, with just under 100,000 sales in both months.

Compare the Market expert Henry Man said more Australians were buying used rather than new vehicles amid cost-of-living woes after prices for secondhand cars fell sharply in early 2024.

But Man says it remains a sellers’ market, with both new and used vehicles more expensive than they were pre-COVID, even though supply levels have begun to rebound.

“The market is definitely more favourable to buyers,” Man said.

“Car prices have lowered, but they are still quite high compared to pre-COVID levels.”

Rapid changes as prices fall

The latest data underscores how quickly conditions are changing across Australia’s car markets.

The days of soaring car prices that were seen during COVID-19 when global supply chain issues caused a shortage of vehicles are over.

AADA figures show national weighted average values for secondhand utes fell 11.8 per cent in the first half of 2024, while SUVs were down 8.2 per cent and passenger cars fell 5.2 per cent.

The trend has been driven by a surge in listings to more than 1.2 million vehicles, a 25 per cent increase compared to the first half of 2023.

But the latest AADA figures show listings have begun to fall as more buyers enter the market to take advantage of lower prices.

“With the commencement of the new financial year, buyers have flocked to the used car market taking advantage of better supply and lower prices as they make an effort to escape the rising cost-of-living pressures,” AADA chief James Voortman said.

Man said that new car prices were still elevated for many models and there were still waiting periods in some cases, which has also pushed people towards secondhand vehicles.

“In the cost of living climate we’re in, people are turning to used cars to save money, especially with new cars having increased in price since the pandemic,” he said.

All that increased demand is rapidly changing conditions across the used car market.

Figures from Moody’s analytics show that after big price falls in March, April and May, there was a slight monthly uptick in prices over June and July in response to higher levels of demand.

“The stage-three tax cuts, effective from 1 July, alongside other cost-of-living supports such as energy bill rebates and rent relief, have provided a subtle lift in households’ budgets which could be playing a role in the demand for vehicles,” Moody’s economist Catarina Noro said.

Luckily, motorists can still expect secondhand vehicles to continue getting cheaper, though perhaps not by as much as they have during the first half of the year.

Vehicle supply rebounding

The biggest reason that car prices will continue to fall, Noro said, is the much greater levels of supply in new vehicles will flow through to expand the availability in the used car market.

Last year Asia’s automotive industry returned to form, with car production soaring 11.6 per cent in China and 18.2 per cent in Japan.

“This growth indicates a strong recovery and expansion in automotive manufacturing, a trend likely to continue,” Noro said.

“As new vehicle production surges, more vehicles are expected to enter Australia’s market, exerting some downward pressure on prices in the secondary market as well,” she said.

Man said that when it comes to new cars, however, sticker prices will likely continue to rise as manufacturers prioritise new generations of vehicles.

“Every year when there’s an update or new generation model, a couple of grand is added to the price.”