Coronavirus: Price tags on pre-owned cars expected to fall post-lockdown due to decreased demand

If any New Zealanders are in the market for a second-hand vehicle, now might be the time to get searching - price tags on pre-owned cars are set to drop dramatically, according to one expert.

The reduced prices will be partly driven by rental car companies struggling to stay afloat during the pandemic, the lack of demand likely to see numerous vehicles offloaded to second-hand dealerships. 

In an interview with Stuff, Rental Vehicle Association chief executive Pim Borren said he had been advised that second-hand car prices could fall by as much as 30 percent as the country moves out of lockdown. He says rental car companies will "absolutely" be releasing some of their vehicles due to the business downturn.

Many rental car companies derive 75 to 80 percent of their business from overseas visitors, a market that has been usually impacted by border closures and travel restrictions amid the COVID-19 pandemic. 

Rental car companies typically either lease their fleets or purchase new cars from manufacturers under the agreement that they are permitted to sell the cars back at an agreed price. 

But as reported by Stuff, manufacturers are using "force majeure" clauses in these contracts to default on buy-back arrangements, due to the expectation that prices are about to significantly drop. 

"You are left with a bunch of vehicles you no longer need because you have got no customers and can't get the price you expected to get... selling them back to the company," Borren told the outlet. 

However, Motor Trade Association strategy manager Greig Epps told Stuff it's too early to jump to conclusions about the state of the second-hand market. He noted that after almost five weeks in lockdown, lost income and unemployment, many New Zealanders will not be purchasing a new car anytime soon. 

Vehicle supply is also set to decline, with many new car manufacturers pressing pause on production overseas. Pre-owned Japanese imports are also expected to arrive in much small shipments. 

Yet the assumption that many dealerships will practically give away cars in a bid to get business back up and running post-lockdown is not entirely likely, Epps said, noting that companies may "deal out stock in a more controlled manner" as "they're not purchasing so far out into the future".