Used Car Supply Plummets 24 Percent, But Demand Remains Resilient

The supply of used cars on its platform plunged 24 percent year-on-year in the January to May period, dropping to approximately 85,000 units from 112,000 units in the same period last year, according to OLXmobbi. Despite this sharp decline in supply, demand for used cars remained relatively resilient, contracting by only about 6 percent, from 141,000 to 132,000 units.

OLXmobbi Director Agung Iskandar stated in Jakarta on Friday that this indicates a unique phenomenon in the used car market, where the drop in supply far exceeds the fall in demand, leading to more stable prices this year compared to last year. “For used cars, this is interesting. There is a unique phenomenon this year. Looking at supply, the indicator is the number of advertisements placed, which has fallen quite significantly by 24 percent year-on-year. But interestingly, demand has not been heavily corrected, only down 6 percent,” he said.

He explained that the number of vehicles being repossessed from consumers with problematic payments has dropped considerably, affecting the number of cars entering the used car market. Furthermore, people are now using their cars for longer periods, as the average loan tenor continues to extend from around three to four years to approximately four and a half to five years. “So people are using their cars longer than before, not replacing them quickly, because their instalments are not yet finished, and there is now the phenomenon of extended tenors,” he added.

Agung also assessed that the low sales of new cars during the COVID-19 pandemic are now impacting the current market. He noted that consumers typically replace their cars after three to five years of use, so the slump in new car sales during 2020-2021 has resulted in fewer units entering the used car market today. The combination of these factors has caused the supply of used cars to shrink, while the number of people looking for used vehicles remains relatively high. “This has caused used car prices this year to be much more stable compared to last year,” he concluded.