Rising costs depress used car prices

As motorists deal with the rising cost of petrol, new research from Auto Trader's latest Price Index, which tracks the average prices of used cars in the UK, shows that the average asking price of used cars from January to March 2012 actually fell 3.9 per cent year-on-year to £8,891.

This drop has been caused by the decrease in overall consumer demand for used vehicles, and a lack of new car registrations since 2007 – a result of the overall weaker economic situation. Therefore the volume of older vehicles on the market has increased, whilst the market has seen a corresponding decline in the number of newer, higher priced vehicles available to buyers – the number of three to 10 year old cars was up eight percentage points to 67 per cent and the volume of cars less than three years old down 10 per cent to 23 per cent, according to Auto Trader, the UK’s number one online marketplace for buying and selling cars. 

The weaker consumer demand for older vehicles was evidenced by a fall in the price of cars over three years old by 7.3 per cent (from £7,950 to £7,372) when compared with 2011. However the lack of cars available less than three years old meant that the asking prices for this age band actually increased by 1 per cent (from £14,612 to £14,797).

Tim Peake, group strategy director at Auto Trader, said:  “The impact of five years of weak new car registrations, aligned to weak spending in the overall economy, has meant a lack of supply of younger vehicles. It is this restricted supply which has caused prices for younger vehicles to start to rise, as demand starts to edge up. The optimist could say that we are seeing very early signs of the green shoots of recovery, especially given new car registrations for March 2012 are up 1.8 per cent year-on-year, with private demand, up 7.4 per cent, driving the overall increase. So whilst recent news has shown that people’s spending on fuel is topping food bills, it wasn’t just petrol for their cars that consumers were buying in Q1.

“However demand overall for both new and used is still subdued, which is why we are seeing an overall decline in used car prices. It seems those that can afford to purchase are making the most of competitive prices being offered by dealers and private sellers. Given the rising fuel prices, now is a good time to consider the total cost of ownership of a vehicle. Households needn’t spend more on fuel than their groceries – for example hybrid vehicles have seen a drop in asking prices over the last three quarters as more vehicles enter the market, and newer cars are more efficient than older versions. Now is a great time to review all the different options in the market and understand how to save money by changing your car.”

The decrease in price in the first quarter was seen in all UK regions, with London seeing the greatest impact – prices have steadily dropped in the capital over the last two years. The smallest percentage decrease quarter-on-quarter was seen in Scotland, the region with the highest average asking price of £9,618 for a used vehicle.