- Older used cars are retaining value better than newer ones due to high new car prices and demand.
- Pandemic-driven price spikes are easing, with the Manheim Index showing a steady market correction.
- Limited affordable new models are driving demand for older cars, likely keeping their prices high.
The record second-hand car prices the pandemic generated may be gone but the old clunker in your driveway may be worth more than you think. Well, maybe not the clunker but your five, six or seven-year-old car could well be.
That’s the takeaway from the price trends identified by Cox Automotive Australia’s Manheim business. Manheim is best known for its auctions but it’s a business that leverages gigabytes of data across the new and used car spectrums. Arguably the most interesting is what’s happening to car prices, reflected in the auto industry benchmark the Manheim Index.
Manheim’s pricing index pre-dates the massive used car value spikes the pandemic wrought upon the market. It’s no surprise, then, that it’s now showing more realistic second-hand prices across most makes, models and car types.
What is surprising however is the delta [difference] in retained value between newer and more aged used vehicles. It’s the latter that are performing better, much better.
Why Older Cars Are Outperforming Newer Models
At the core of the strong retained value performance of older used cars is the rapid increase in the cost of new cars — conventional, hybrid and battery electric. Stephen Lester, Cox and Mannheim boss, explained to DMARGE: “We are seeing a dynamic that’s played out over the last 12-18 months where our more aged vehicles are actually retaining values far greater, relatively, than newer models. This hasn’t happened historically…”
“The dynamic that happened largely due to scarcity in the COVID and post-COVID period — coupled with supply chain issues, shortage, all the stuff — saw used car values remain very, very high. At its peak the [Manheim] index, was somewhere in the neighbourhood of 146. In 17 of the last 18 months that has been steadily coming down.”
Stephen Lester
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“What has happened though is a change in the curve… Late model [newer] vehicles are not performing as well as older vehicles… Those north [older] of the six-year band are retaining better values against the index.”
Lester says the reason shouldn’t be surprising to anybody who has been shopping for new cars. “The reality is that we’ve had a massive appreciation of [new car] price over the last few years and we’ve had this change even though we’ve had so many more new car brands talking about coming here: “[But] we haven’t had any growth in the bands of the price point of [new] vehicles that are offered.”
Simply, says Lester, as new models have arrived, they’ve slotted into the newer, higher, price brackets…
“For the consumer looking to add a vehicle in their household, there is not that quintessential A$14,999 or A$19,999 [new car to choose from]. And to be honest, there’s barely a A$29,999.”
Stephen Lester
How New Car Price Hikes Are Reshaping The Australian Market
Lester asserts that the new car price hikes have priced new and near-new cars out of more Australians’ price range. As a result, they’re turning to older cars, which in turn is driving up demand for used stock —and their price.
The good news? Lester predicts your older car’s value will remain relatively high for the foreseeable future. The bad? You’ll be selling and buying in the same market; Even with the significant number of new brands coming Down Under, don’t bank on new car prices crashing any time soon…
