Used car prices in Australia are expected to experience a significant decline in 2025, driven by an oversupply of vehicles in the market. This situation has been exacerbated by a combination of factors, including increased production of new vehicles, changing consumer preferences, and economic conditions affecting disposable incomes.
Current Market Conditions
The Australian used car market has witnessed a notable shift in dynamics. In recent months, there has been a surge in the number of used vehicles available for sale, with listings increasing by approximately 5.2% to a total of 314,672 vehicles[4]. This oversupply is leading to longer selling times, with the average time to sell a used car rising to 46.4 days, the highest level recorded since January[4]. As a result, sellers are facing downward pressure on prices as buyers have more options to choose from.
In addition to the oversupply, retained values are declining across various vehicle segments. The most affected categories include passenger vehicles and electric vehicles (EVs), which have seen significant increases in listings[4]. With more consumers opting for used EVs due to their lower price points compared to new models, this trend is likely to continue as manufacturers ramp up production.
Economic Influences
Several economic factors are contributing to the anticipated drop in used car prices. High interest rates have made financing more expensive, which discourages potential buyers from making significant purchases like cars[3]. Although there have been recent tax cuts and cost-of-living supports that could stimulate demand, the overall economic climate remains cautious. Moody’s Analytics predicts that while there may be temporary spikes in demand due to these supports, the long-term outlook suggests a continued decline in prices as supply outstrips demand.
Furthermore, the global supply chain is slowly recovering from pandemic-related disruptions. As manufacturers increase production rates, more new vehicles are entering the market, which will ultimately lead to an increase in the availability of used cars[5]. This influx will further exacerbate the current oversupply situation.
Predictions for 2025
Experts predict that used car prices could drop significantly throughout 2025. Some forecasts suggest a potential decrease of 4.8% in used vehicle prices following a 9.3% decline observed in 2023. The anticipated price drop is attributed primarily to the increased supply of new vehicles and sustained high-interest rates that continue to dampen consumer purchasing power.
Additionally, many industry analysts believe that this trend may not only stabilize but could also lead to a more normalized market by late 2025. The expectation is that consumers will benefit from lower prices and an expanded selection as dealerships work to clear out excess inventory.
In summary, the Australian used car market is poised for a significant correction as it grapples with an oversupply of vehicles and ongoing economic challenges. Buyers can expect favorable conditions in 2025 as prices are projected to fall due to increased inventory and high interest rates limiting consumer spending. For those looking to purchase a vehicle, this may represent an opportune moment to secure a better deal.