Nick Adamidis, national sales and marketing manager for automotive research company Glass's Information Service, says people are being forced to sell their cars cheaply.
"The new-car market has been booming for the past few years and as a result there's an oversupply in the market place, which means that used cars are not necessarily bringing the prices people believe they are worth," he said.
"The price of fuel has had a big effect on cars with V8 engines, for example, which are depreciating faster than other vehicles as people try to get rid of them.
"People now expect a discount if they are buying a V8, because of their petrol usage."
In 2000, a three-year-old V6-engined Holden Commodore Executive sedan could be bought for just over 50 per cent of its original purchase price, but today buyers have to pay only 44 per cent of the original price.
Mr Adamidis said drops in tariffs on imported vehicles were also driving prices down.
"It affects the whole market, because if the makers of imported vehicles drop their price by $2000 or $3000 then the local makers have to drop their prices as well to stay competitive," he said.
"It's a great time to be buying a used car — it's a buyers' market.
"But we've still got a fair way to go. In the US and the UK, where the markets are more free, the average car, after three years, is worth 30 per cent of the original purchase price.
"In Australia, the average is 45 per cent, but we're heading in that direction and we'll get there in the next five to seven years."
The drop in used-car prices has also been noted by the NSW Department of Commerce, which manages the Government's fleet.
A department spokeswoman said State Fleet had tracked a downward trend in the prices it was getting for its used vehicles.
Large, locally manufactured cars have had the biggest drop with much less in the small car segment. The drop in prices was spurring sales, however, with clearance rates at government auctions over the past two weeks of 99 per cent and 94 per cent, respectively.
David Smith, senior manager of divisional services for the Motor Traders' Association of NSW, said prices would continue to fall.
"Some of the less fuel-efficient cars are definitely feeling it, but small cars are holding their value fairly well," he said.
"That's a reflection of the new-car market, because a lot of people are buying smaller cars and a lot of them are being traded in."
He said that used-car dealers were the ones being squeezed by the price falls.
"There are a lot of dealers out there who are doing it tough," Mr Smith added.
BEST VALUE RETAINED*
Small
Subaru Impreza ............. 62%
Mini Cooper .................. 61%
Mitsubishi Lancer .......... 59%
Medium
Subaru Liberty .............. 58%
Mazda 6 ....................... 55%
Honda Accord ............... 53%
Large
Toyota Camry(4cyl) ....... 45%
Toyota Aurion ............... 42%
Ford Falcon LPG ........... 42%
4WD
Nissan X-Trail ................ 64%
Subaru Forester ............ 63%
BMW X3 ....................... 61%
WORST VALUE RETAINED
Small
Kia Rio ......................... 38%
Suzuki Swift ................. 38%
Proton Savvy ................. 38%
Medium
Kia Optima ................... 37%
Kia Magentis ................ 37%
Hyundai Grandeur ......... 37%
Large
Nissan Maxima ............. 37%
Ford Fairmont ............... 34%
Ford Falcon .................. 32%
4WD
Land Rover Freelander ... 42%
Land Rover Discovery .... 40%
Ssangyong Musso ........ 40%
* Based on wholesale prices of three-year-old vehicles in average condition.
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