Pandemic still driving car prices higher

The good news for used car buyers is that they should soon return to normal depreciation patterns.
The good news for used car buyers is that they should soon return to normal depreciation patterns.

Cars are usually regarded as a depreciating asset - losing value as soon as they've been purchased.

But sustained higher price tags for both new and used vehicles during the pandemic have briefly turned that wisdom on its head.

Data from Moody's Analytics shows the price of a used car in June was a third higher than at the same time last year, thanks to a lack of cars on the market.

A shift away from public transport due to fears about COVID-19 was also a contributor to households buying a second car, Moody's found.

Federal Chamber of Automotive Industries Chief Executive Tony Weber told AAP the new car market is also "really solid", having experienced eight months of consecutive growth.

"Some people are cashed up and looking to buy a vehicle ... they're not going overseas and they're not going out," he said.

He said a global supply squeeze for new cars due to production shutdowns and a shortage of electronic semiconductor chips was restricting supply.

"Factories are closed right around the world due to COVID, so part of the supply chain of the actual manufacturing is closed," Mr Weber said.

He said the market is also being buoyed by consumers making use of the instant asset write-off.

Mr Weber said people were now waiting months for their new cars to be ready.

"That's why I'm buoyant about the second half of the year - orders have been placed that haven't been filled."

SUV and light commercial vehicles such as dual cab utes are selling strongly, while there has also been growth in electric vehicles.

It follows a particularly weak year of new car sales in 2020 with less than 917,000 sold, compared to 2017 in which almost 1.2 million vehicles were sold.

Senior Economist at Moody's Analytics, Michael Brisson, said projections showed used cars would soon return to normal depreciation patterns.

"It took a confluence of unpredictable circumstances ... to filp the market on its head. It will not take that much for the market to return to normal," he said in his latest report.

Toyota was the market leader for the financial year to June, followed by Mazda, Ford, Kia and Hyundai.

Australian Associated Press