The average price of a used vehicle tends to decrease as time passes. In part because of its increasing mileage, but partly because it is aging. Accountants would refer to it as a “depreciating asset.” After several turbulent years, pre-owned automobile prices in South Africa have reverted to historical norms
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This long-term trend was shattered by the Covid epidemic. Due to factory and port closures, semiconductor shortages, and other supply chain disruptions, the supply of new automobiles was drastically reduced. New car purchasers subsequently turned to the used automobile market, but there were only so many used cars available. Simultaneously, interest rates dropped significantly, making auto financing more accessible. First time in at least a decade that used automobile prices have increased due to an increase in demand.
What has transpired since? getWorth, a company specializing in automobile pricing, provides intelligence on the used car market. They clarify that the supply of new cars has been recovering. In addition, rises in interest rates, fuel prices, and other costs of life have lowered affordability. This essentially reversed the situation post-Covid. What effect has this had on car prices?
getWorth’s advanced pricing tools are based on artificial intelligence and current market data. They have created methods to distinguish between the impacts of distance and time.
Colin Morgan, getWorth’s chief financial officer, notes, “This allows us to compare apples to apples.” “For instance, we would compare the price of a 2018 2.8 Diesel Fortuner Automatic with 60,000 km a year ago to the price of the same car with 60,000 km today – despite the fact that actual 2018 models on the market may have added 10,000 to 20,000 km.”
GetWorth created a graph depicting the comparable price trends. It depicts an intriguing picture (*see graph attached).
Since mid-2022, prices have returned to their pre-Covid trend of dropping, following which they began to rise after the epidemic struck.
“Only recently have like-for-like price levels returned to levels close to those prior to Covid,” says Morgan. “This does not mean that the value of your car is the same today as it was when Covid struck; you would have added mileage, which would have added another layer of depreciation.”
GetWorth’s information is derived from its status as the biggest online buyer and seller of pre-owned automobiles. The company was the first in South Africa to use live-market pricing, and it created AI-based pricing algorithms to boost accuracy, with the goal of assisting consumers in making informed purchasing and selling decisions.
Morgan admonishes, “The return to the old price trends does have implications for consumers.” “During the post-Covid era, people became accustomed to the notion that automobiles retained or even rose in value. A person may purchase a vehicle at a premium, finance it with a large balloon payment, and still have equity when selling the vehicle a year later.
In addition, the market’s peculiarity favored scalping and flipping. However, those days are now over and car buyers need to be careful that they are buying at the right price and financing their vehicle in a responsible manner.”
Morgan explains, “We use our tools to trade every day in the live market, and we have more than 350 cars on our floor, so we can observe these forces in action in the real world.” We must regularly change our prices to ensure that our buying offers and cars for sale are competitively priced.”
“A buyer’s market is emerging,” he concludes. “It is a good time for those updating or upgrading their cars, as there are attractive deals available”.
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