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Why you shouldn't be spooked by the currency's impact on new-car prices. Yet | comment

Car affordability to remain low despite fall in Australian dollar.

The value of the Australian dollar against the US dollar fell to a six-month low this week, but don't expect to see a kneejerk rise in new-car prices.
 
There are several compelling reasons for this.
 
For starters, every car already on dealer lots was imported by the car company and paid for by the dealer when the currency was stronger.
 
Secondly, most brands do not buy in US dollars.
 
And thirdly, most companies buy their foreign currency up to six and nine months in advance, to protect customers (and the price of cars) from such fluctuations.
 
The value of the Australian dollar versus the Japanese Yen, the Thai Baht (Thailand is now our second biggest source of cars ahead of South Korea), and the Euro are all relatively steady.
 
Furthermore, economists are predicting that the value of the Australian dollar will remain above 90 US cents for at least the next 12 to 18 months.
 
Any guessing beyond then is exactly that: a guess.
 
So while the latest car sales figures don't reflect it, as we've now seen eight months in a row of sales decline and the biggest dip since the Global Financial Crisis, the reality is new-car prices in the mass market (below $60,000) are the lowest they've been in 20 years and, thanks to low interest rates, car affordability is at a 38-year high, according to CommSec.
 
New-car prices will only start to rise once the Australian dollar slumps across more currencies for a several months in a row. Then, we will need to worry.
 
All that said, Australians still pay over the odds for luxury cars, but you can blame that on our relatively small market (less than 1 per cent of global vehicle sales) and a Luxury Car Tax that slugs buyers 33 per cent of the cost of most cars above $61,884.