The Second-hand Opinion

Sydney Morning Herald

Saturday January 10, 2009

David Morley

IF THERES value to be had in new metal, theres also good news for anybody shopping for a second-hand car.

The operations manager of industrywatcher Glasss Guide, Chris DSousa, says that whenever newcars are being discounted, usedcar values also take a beating.

And, says Mr DSousa, discounting is nothing new, nor is it even seasonal; it is a permanent fixture in theway thingswork in the Australian car market.

If you look at the industry, you see a market thats used to discounting, he says.

Its simply that the discounting is more visible now.

In the past, if you had paid recommended retail price for a new car, youd be a very unique case.

Mr DSousa says he believes that used-car prices will continue to fall, but that discounting will only be a reinforcing factor, and not the root cause of used cars losing residual value.

So what are the other factors forcing down used-car prices?

According to Mr DSousa, the ageold situation of second-hand sales outstripping new-car sales by a factor of around 1.5 will continue to be a major part of the local sales equation.

Even if new-car sales fall to 850,000 next year, used-car sales will also fall, but therell still be a potential oversupply of them.

The general economic situation will also play a part.

If the general economy remains flat for the next 12 to 18 months, big, thirsty cars will potentially lose value.

But Mr DSousa admits that, when it comes to theAustralian market, things are rarely that simple.

Having said that, V8 cars have the ability to hold their own because V8 people tend to buy them anyway, he says.

But whether that is sustainable in the face of higher running costs and potentially lower incomes is the big question.

The popularity of small, economical cars will place a floor under their second-hand prices, but for bigger cars, it doesnt look as good.

© 2009 Sydney Morning Herald

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