For the past twelve months, prices for European used cars have been surging. Experts say it could be two years before the skyrocketed prices being paid for used cars ease.
It’s safe to say that 2020 has heralded an automotive renaissance in Australia. With public transport during the global pandemic an unfavourable option, those of the population not financially affected had little else to spend their money on other than risky staycations, the fluttering stock market or home renovations. Many Aussies turned to spending their spare coin picking up a new set of wheels.
Used car prices keep breaking records as new vehicle supplies remain constrained amid semiconductor chip shortage
A chronic shortage of new cars caused by production interruptions and a more recent shortage of semiconductor chips dubbed ‘chipaggedon’ has left dealerships with “more customers than cars”.
This global shortage of new cars has left Australian car yards nearly empty, leading to an increase in demand for used cars. Like anything, with a rise in demand, comes a rise in prices. ComSec data shows second hand car prices are up 30% from this time last year. If you’re considering selling your car, now might be the time to pull the trigger.
The European second hand cars Australians can’t get enough of
Carsales found that there has been a peak in interest in used European cars. Their data reveals that interest in performance oriented German luxury cars, in particular Mercedes Benzes, Porsche and BMWs, has been incredibly high.
DMARGE reports the most popular European used car on the market is the Mercedez-Benz C63 AMG S, which received over 642,000 searches in Q3 of 2020 alone. Several other sought after vehicles include the Porsche 911 and Mercedes-Benz A45 AMG. They concluded that four of the top ten most searched for European used cars were AMG models.
Mechanics experiencing their busiest months on record
In all of this used car mania there’s been a happy consequence for mechanics who have experienced a surge in business from people needing roadworthy certificates and pre-purchase inspections. Drivers holding off on new car purchases also turned to mechanics in droves to keep their existing cars running and give them the confidence to travel.
Business for Victorian mechanics was particularly huge in the lead up to Christmas last year as so many cars were due for servicing during the months of lockdown.
Experts say that prices of used European cars are not expected to revert to pre-pandemic levels, and they will remain elevated throughout the second quarter while supply pressures and steady demand keep the market hot.
This is because prices of durable goods do not usually crash back like commodities. The most likely scenario we will see is an extended period of limited price growth over the medium term. What this means for individual vehicles is a return to a more normal rate of depreciation in the next two years or so.
Tips on looking for a good second hand European car
Are you looking to buy a used car but not sure what to expect? We asked our mechanics for the top four things you need to know before buying a used car:
1. Understand costs
If you’re buying a car for the first time, understanding the cost is important, as often the price tag on the car is not the last cost. You have to consider ongoing costs such as registration, insurance, warranty and fuel consumption. For example, late-model cars are typically more expensive to insure but may be more fuel efficient.
Once you have determined your budget and have researched your ongoing costs, be wary of the fees associated with the place you buy from. It’s commonplace for auction houses to charge processing, administration and buying fees. Make sure you factor these into your budget.
We recommend taking a look at this article written by our friends over at Pickles than runs through a list of the best of used cars of every classification for 2021.
2. Do a proper inspection
If you can attend an inspection in person, make sure to walk around the vehicle and take notes of any damage that may affect the quality or usability of the car. In addition to this, you can ask for a condition and rectification report which will highlight any exterior problems and the cost to fix it.
3. Know when to buy
As we’ve already discussed, used cars are selling for record prices at the moment. This is likely to remain the case for the foreseeable future. A tip we can give you is that summer tends to draw in larger crowds as people look to buy and sell their car which further drives up the prices due to increased competition. To get the best deal, hold off until winter as this is when cars are often the cheapest.
4. Do your research
Most people will know to research body types, safety and brands but one key tip we can give you is to think about where and who you are buying from. Typically, you can buy a used car from a dealer, a private sale or an auction house.
Cars at auction houses present the best value for money, often selling for thousands less than market value. If you’re unsure about auctions and would prefer to buy at a fixed price, just be sure to research the vehicle’s history.
Look for comprehensive service histories, PPSR resorts, condition reports, rectification reports as well as who the previous owners were. We would recommend ex-government and fleet cars as these tend to be in the best condition and come with complete service histories.
Last but definitely not least is weighing up the price. There are several inline tools you can use such as Prices People Pay that can give you a good indication of fair prices.
Dealerships vs workshop for European car service
Our customers often cite price as being the reason they want to take their car to a local mechanic as opposed to a dealership. Or perhaps the time taken to get across town or even further if you live rurally. A lot of the time it’s because people have a reliable mechanic that they’ve been using for years for scheduled services who they trust more than a dealership. ALl in all, there are many factors that weigh into the comparison between dealerships and independent workshops. Factors such as the kilometers on the car, the age of the vehicle, the make and model, the list goes on. While we know dealerships are certain to be more expensive than a generic workshop, keep in mind that some workshops do apply a luxury car tax for European cars.
Our final thoughts on the used European car market in Australia
If there’s one key takeaway from this article, it’s that it’s a seller’s market out there. If you have a larger budget and don’t mind a longer wait time, you might be better off purchasing a brand new European car. For those with smaller budgets and an immediate need for a car, a used vehicle might be the best option for you in the short term while cars are depreciating at a slower rate.
It’s likely that mechanics workshops like ours will continue to experience some of the busiest months on record thanks to this new run on second hand vehicles from people desperate to hit the road and unwilling to wait for new overseas imports. It’s estimated that Australians are paying almost 40% more for used cars now than they were prior to the pandemic and that this will continue to strengthen with no end in sight.
—
Looking for a European car service? All of our car services are done by the book. Book your car in with us today here.