Steve Allen has been selling cars for 25 years, but now he's an economic forecaster — that's because the gently falling prices of used cars are the first substantial sign of deflation in the economy.
"So there is an excitement about that, and it certainly makes our job easier because these cars become more attractive for people to buy," said the manager of prestige vehicle trading at auction house Pickles.
The company sells more than 60,000 used cars a year. The easing of prices — after rocket rises since the start of the COVID pandemic — are welcome.
"It's a feeling like things are slowly returning to normal," he said.
Used car prices starting to ease
The Reserve Bank of Australia (RBA) has been raising interest rates to try to fight inflation, which it has tipped to soon hit 8 per cent.
By raising interest rates, people with mortgages have less money to spend, which the central bank hopes will reduce demand.
That's something Mr Allen is seeing as he auctions cars.
"I think reductions of anywhere between a couple of per cent and, I guess up to around 10 per cent if you put it, generally speaking," he said, noting that the largest falls tended to be on well-loved "high-kilometre" vehicles.
Industry watcher Santo Amoddio agrees that used car prices are falling.
"In the last month we've seen a slight decline in use car prices. We don't know whether that's a permanent shift," Mr Amoddio said.
"But there is a softening in the market. That might be related to interest rate rises that we've experienced in the last six months and a slight improvement in new car supply."
How has pandemic put pressure on prices?
To understand the car market, we need to look back to the beginning of the COVID-19 pandemic in 2020.
Before the pandemic, Glass's Information Services estimated the average wait for a new car — from signing the order to driving it home — was 32 days.
However, with a shortage of microchips and global supply chain problems, those wait times blew out.
By August this year, the figure was 159 days or more than five months.
With supply improving, the average wait is now back to a still-long 151 days.
"Some wait times are out to 12 months," Mr Amoddio says.
"The Toyota RAV4 hybrid, for example, [its] wait time is still in excess of 12 months for that car."
Those long waits caused the price of used cars to rocket, because they could be driven away the same day.
"If it's available as a used car but not as a new car?" Mr Amoddio asks, pretending to be a dealer. "'Do you want it as a new car? Come back in 12 months time'. Incredible".
Improving the supply of new cars, and the broader economic hit of inflation in the cost of living, is now bringing down the prices for used cars.
How about new car prices?
But what about new cars? Prices are still climbing.
"The same model is increasing month in, month out," says Mr Amoddio.
"Some manufacturers are updating their price list monthly at the moment."
Michael Clarke of Cox Automotive said forward orders were easing, meaning manufacturers were able to get on top of demand.
"We are starting to see signs of it starting to shift," he said.
"We're seeing customer sentiment starting to reduce, and we're seeing that the market supply of vehicles starting to increase in that first half (of 2023)."
Mr Clarke said he saw prices remaining high at the start of the year, then stabilising.
Towards the end of 2023, he expected manufacturers to get ahead of demand, which could push prices to "normalise" — or, at least, not rise so fast.
What about going electric?
There's another element that complicates the picture: the entry of new vehicle brands.
Many are electric-only, with big visions for a slice of the 1 million cars Australians buy each year.
"We're seeing some of these more-aggressive brands starting to come into the country with really strong ambitions," Mr Clarke said.
If you added up their goals for market share, they will be seeking more than 30 per cent of the market by the start of 2024.
"[It's] pretty aggressive expectations across electric," he added.
That increased competition — particularly in the smaller models that electric vehicles are currently focused on — could slow any broader lift in the price of new cars.
Is it time to buy?
Like real estate agents, people in the business of selling cars always think it's a good time to buy.
For used cars, prices are falling, so they could well be right.
For new cars, buying now probably means you lock in a lower price — because what you would pay in six months time for the same model will almost certainly be higher.
Mike Sinclair, editor-in-chief of carsales.com.au, takes a broader view.
Some customers were dealing with the pressure of higher living costs, due to inflation, but others would not even have noticed, he said.
"There's almost a bit of a 'two speed' economy out there," he said.
"[For] the people who have got money, this bit of inflation is pretty much a blip in what they're looking at, in terms of their overall budget."
"So they're still out there shopping."
