Why are new and used car prices so high right now?

QUESTION

Hi John,

I have noticed quite a significant jump in prices of new cars, and used cars, in Melbourne. For example, a friend of mine bought a 2016 Toyota Corolla Hatch with 50,000 km about a year ago for $14,500 drive away (in Victoria). Now, similar Corollas with same km’s are for sale at around $18,000 - $19,000 drive away.

Same story with brand new cars.

I wanted to ask you if you have noticed a similar trend in other states and in Australia in general. And if you have, would you know the reasons?

I look forward to hear from you.

Kind Regards,

Belal


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ANSWER

Belal,

NEW CARS: Dealers are discounting less at a retail level because stock is less available - demand is high, relative to supply, therefore prices face upward pressure. Most car companies have, however, not raised prices.

USED CARS: Stock shortages of new cars have placed upward pressure on trade-in prices (because late-model used cars are an alternative to new cars for some buyers). Therefore, trade-in prices are historically high right now, as are used car prices generally.

JC


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