The ‘COVID tax’ on Used Car Prices

‘Gains across the board’ is a nice sentence to hear if you’re planning to sell your car and right now used car prices in Australia are seeing significant growth – some by as much as 30% or even more. But why? And, will it last?

Here’s what we know about what triggered the rise in used cars prices in 2020/21

Trigger #1: Public transport fears

Pre COVID, around 3.4 million Sydneysiders used public transport, equal to 76% of the city’s population, at least once per three months. Bus, train and ferry use plummeted by around 80% ‘peak COVID’. Other centres in Australia reported similar figures.

But it’s not just public transport taking hits.

Rideshare services also reported huge declines. However, food deliveries are way up – doubling in some areas from pre-COVID. Working from home shapes industries.

As more Australians have opted out of public transport in fear of the virus and chosen their own isolated vehicles instead, demand for private vehicles has increased.

Did you know? If busses enforced the ‘1 person per 4 square metres’ rule, we’d be left with six passengers and a driver per bus.

Trigger #2: Supply chain disruptions

Assembling vehicles requires a lot of international cooperation. For example, automakers may rely on electronic components manufactured in China and Japan, paint from Europe and raw materials from Australia – all to be shipped to Thailand for assembly.

Lockdowns and travel bans don’t make this global ballet easy.

In fact, when South Korean car maker, Hyundai, closed seven of its local factories to slow the spread of COVID, it affected around 40% of the brand’s global output.

The result: delays on MY 2021 cars.

Delays on 2021-model cars have pushed buyers to look at used vehicles, having been deterred by delay times.

Did you know? Other countries are no different. In the US in early 2020, Tesla sold 82% of their popular Model 3s without new owners even waiting to test drive a vehicle. However, there are still a few new 2021 model year cars to watch out for this year no matter how late they arrive.

Trigger #3: Domestic travel

Australia’s unquenchable thirst for utes and SUVs is keeping these vehicles especially high. They made up nearly half (49.6%) of all new cars sold in Australia in 2020.

Tying in with Australia’s thirst for utes and SUVs is the increased demand for domestic travel. The stats show it:

Australia’s most popular cars in recent years:

  • 2017: Toyota HiLux ute
  • 2018: Toyota HiLux ute
  • 2019: Toyota HiLux ute
  • 2020: Toyota HiLux ute
  • January, 2021 – no prizes for guessing: Toyota HiLux ute

Domestic holidays in Australia:

Regional travel just after Easter 2020, typically a big earning period, generated $12.4 million.

By September, 2020, the school holidays brought in $170 million to regional communities throughout Australia.

Australia is seeing significant growth in its domestic tourism – one of the few good things to come out of COVID.

The demand is increasing for vehicles capable of long distances with some off-road ability.

Did you know? In December 2019, around 1,056,000 Aussies travelled abroad. Only 12,090 did so in December, 2020. A massive 98.8% drop.

What does it mean for consumers?

The ‘COVID tax’, as it’s come to be known as in used car sales groups on social media, might be an incentive to upgrade.

As many have found, large deposits gained from selling used cars can give access to low rates car loans and smaller-than-perceived loan amounts needed for vehicles that might have once been out of reach.

But will the good times for used cars last?

It’s unlikely. Although, as of February, 2021, due to stock shortages, the new-car market in Australia has not yet returned to its pre-COVID levels, things are looking up for dealer showrooms. With vaccines just around the corner in Australia (and already rolling out in some countries), global supply chains are predicted to churn back to ‘normal’.

This means more new cars on our shores and in showrooms. The result will likely be an increase in supply which, as any high school economics student will confirm, means lower prices.

Additionally, with vaccines in veins, the fear of public transport and international travel bans will slowly fade.

In other words, the squeezes causing high used car prices are set to ease in 2021.

Get Started

If you’re driving a vehicle that’s feeling a little tired, it’s likely commanding a high price – but for how much longer?

Have a look at how your car’s year / make / model compares on used cars social media groups, GumTree and CarSales.

To get the best price for your car, start with some high quality photos.

Make sure to include the whole car in each photo and avoid anything in the background that may deter buyers, ie: other damaged vehicles, tyre marks on the road or tools indicating you’ve been tinkering with it.

Tip: Front wheels angled to the left, with photos taken from a 45-degree front-side view make excellent cover photos for ads.

Write an honest description.

Potential buyers are prone to suspicion. If your car has any damage, make sure to mention it in the description. For example, ‘small scratch on rear door’ or ‘one wheel has slight gutter rash’.

Tip: Don’t list any features that people know or assume it will have like; power windows, power steering, A/C and a radio.

Be a genuine seller.

Be prepared for buyers not to turn up on time, list all minor imperfections on the car or make low-ball offers. Some used car sales platforms allow users to rate each other (GumTree for example) so always be polite and diplomatic no matter the buyer's stance.

Tip: If you don’t feel comfortable having strangers come to your home, meet them in a public car park nearby.

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