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Used car values dropping

In the next few years Australian car resale values will fall as low as they are in Europe and America.

You might want to get rid of your old car soon – its value is falling further and faster than ever.

While we’re buying new SUVs and utes in record number, used cars are headed toward historically low resale values. “We have seen significant discounting over the last three to six months as well as new model prices fall or features added at no additional cost, which pushes down resale values on used cars,'' Glass's Guide sales and marketing manager Nick Adamidis said.

“As the Australian dollar remains above parity against the US and at record highs against the Euro, we will continue to see the importers provide high-quality product at cheaper prices which puts pressure on resale values on used cars.” Mr Adamidis said resale values will bottom out by 2020.

“Historically Australian resale values have been much higher than in Europe or the US,'' he says. “A three-year-old car here will retain about 45-50 per cent of its value whereas in the US and Europe it's about 35 per cent. “As our dollar remains strong, our residual values will drop down to Euro and American levels. It will take about 7-10 years. It's a long-term trend.''

One of the best gauges of resale value is the percentage of the model's sales to private as opposed to fleet buyers. “Most cars are being sold to fleet or novated leases so they're holding on to them for about two to four years, whereas private individuals would hold on for four to seven years or longer,'' Mr Adamidis said.

“If a car sells 50,000 and 45,000 of those are sold to private, then 45,000 will be held out of the used car market for longer so they will be rarer and therefore retain more value. But if they are sold mainly to fleets they will hit the market sooner so there will be more on the market and resale values will be down.

Resale values in the US are expected to increase after the global downturn, but not here. “During the recession, fewer new cars were made, so availability of recent used cars is down in the US, leading to better retained values,'' Mr Adamidis said.

The US market dropped from about 16 million a year to 12 million, whereas the Australian market dropped only about 10 per cent from one million to about 900,000. So supply of recent used cars is still strong.