Motor vehicle price index

IBISWorld forecasts the motor vehicle price index to fall by 0.2% in 2025-26, to 99.8 points. Global production of new vehicles is on track to rise during the year. Rising production will likely place downward pressure on prices. A greater supply of new cars is set to soften demand for used cars, with these prices rising over the first quarter of 2025-26, while new car prices have fallen. The New Zealand Government's (Te Kawanatanga o Aotearoa) Investment Boost policy contributed to a sharp uptick in new vehicle sales since June 2025. This policy allows businesses to claim a 20.0% tax deduction on new asset purchases, including motor vehicles. As competition for new cars heated up, this may have contributed to lower prices.

The value of the New Zealand dollar has a significant effect on the motor vehicle price index. Imports account for the overwhelming majority of New Zealand motor vehicles. All new cars are imported into New Zealand for sale on the domestic market. Additionally, a large number of used cars are also imported into New Zealand, particularly from locations like Japan and Australia. The trade-weighted index can have a strong influence on the price of these vehicles, with domestic prices rising if the New Zealand dollar depreciates. This trend can be particularly true for used cars, as these are less likely to have prices set by major international car manufacturers. The New Zealand dollar has depreciated over the past five years, which has placed upwards pressure on the price of imported cars. Additionally, a severe shortage of semiconductors, particularly mature node chips, which are crucial in vehicle manufacturing, along with a surge in shipping costs, which has increased the cost of importing vehicles to New Zealand, have boosted the motor vehicle price index, as motor vehicle sellers have passed these extra costs onto consumers.

Sales of new cars have increased as a share of total car sales over the past five years. New car sales reached 62.0% of total car sales in New Zealand in 2022-23, but has dropped back in subsequent years, and currently represent 59.1% of total sales. Growth in discretionary incomes during the pandemic supported new car sales, as consumers were able to afford more expensive goods. However, supply chain disruptions weakened global production driving up prices for new and used cars in 2021-22 and 2022-23. Overall, IBISWorld forecasts the price of motor vehicles to rise at a compound annual rate of 1.4% over the five years through 2025-26.