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Why Are Car Prices so High Recently?

It’s common knowledge that the majority of cars depreciate over time, making the used-car market the first point of call for most Perth buyers. However, like many other industries, the COVID-19 pandemic has created plenty of hurdles for the automotive industry.

If you’re in the market to buy or sell in Perth, you may have noticed the rise in new and used-car prices since the onset of the pandemic – aptly referred to as the COVID-tax.

In this article, we provide the leading reasons for the abhorrent rise and advise you on what action to take.

How bad is it?

The extent of the rise in car price depends on the make and model of the vehicle, but on average, the price of a second-hand car now sits around $33,000 according to AutoRadar. Compared to early 2020, that’s up over $10,000!

For example, a 2012 Mazda CX-5 that may have been worth $14,000 in 2020, is now worth upwards of $20,000 according to CarsGuide.

The worst hit used-car body types appear to be SUVs and dual-cab utes.

So, what is the primary cause of all this?

Microchip shortage

It’s well known that supply issues and material shortages are playing a part, more specifically, a global shortage in computer microchips.

More than 1,000 of these microchips are used in the production of modern cars, to control every little electric function within the vehicle. As a result of the shortage, car manufacturers are charging more, pushing many Perth buyers to turn to the used-car market for a ‘cheaper’ car.

The significant rise in used-car buyers has created a seller’s market, hence the absurd prices.

But wait, there’s more

Across the globe, a shortage of workers has resulted in a reduction in new cars. Plus, a shortage of shipping containers means it takes longer for cars to be imported to Australia.

A flow on effect of this is a reduction in trade-ins for new car sales and car rental agencies being unable to sell off their old vehicles – because they can’t get replacements.

The new and used-car struggle has prompted many Perth drivers to take better care of their vehicles and turn to smash repairs after an accident, to avoid buying a replacement.

When should you buy?

There’s no way to know when the shortages will subside, but some sources estimate it could be 6 months to a year or longer before we see a substantial improvement in Perth car prices. This means, doing your best to make use of an existing car for a while longer.

If you can’t wait and are in the market for a used car, make sure to get a professional to conduct a pre-purchase car inspection over any vehicle you are considering. This lowers the risk that you’ll pick up a damaged car and have to fork out hundreds for panel beating or car servicing.

Make the most of the market

Some opportunistic Perth residents have used the current market to flip under-valued or damaged used cars and turn a profit. This is a risk as some makes and models aren’t worth the time and money.

If you’ve been planning to sell, now’s the time!

Ensure your car is best placed to maximise its return – get minor scratches and dents removed with panel beating. For additional ways to boost the return from your car, here are ‘5 Ways to Increase the Resale Value of Your Car’.

Can we help?

For almost 50 years, RENEEW has been repairing and servicing cars in the South of Perth. As an approved repairer for most insurance companies, we have the skills and services to get your vehicle in tip-top shape.

Whether you’re looking to buy in this market and need a pre-purchase car inspection, or selling and need a service, contact us.


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