Used car sales rev up
FIVE-MINUTE GUIDE TO... VEHICLE DEPRECIATION
ALMOST every motorist dreams of buying a new car but many are put off by the dreaded D-word, as they assume their purchase will depreciate the instant it leaves the forecourt.
The drop in value depends on make and model but was traditionally between 15 per cent to 35 per cent in the first year and up to 50 per cent or more over three years.
Yet recently, this pattern has reversed as used cars have started to appreciate, which means owners can sell them for more than they originally paid.
Last July, prices were accelerating at a staggering 19.5 per cent a year and although the pace has slowed, March was a record month for used cars with the average price hitting £17,843,Auto
Trader data shows.
Post-covid supply chain hiccups and microchip shortages have slashed the number of new cars available for sale, forcing buyers into the second-hand market and increasing competition for the limited stock available.
Car sales are defying the cost-of-living crisis, said Auto Trader’s director of Data and Insight Richard Walker: “While other parts of the economy are subdued, the car industry is proving its resilience.”
Appreciation is a blow for buyers hoping to bag a bargain, while sellers cannot quite believe their luck (until it is their turn to buy).
Sometimes local factors apply, said Alex Buttle, co-founder of used car market place Motorway.co.uk. “London’s Ultra Low Emission Zone and other initiatives such as Bristol’s Clean Air Zone and Birmingham’s Clean Air Zone are affecting pricing as the value of compliant models stays relatively high.”
As ever, it depends on the make, model, age and condition of the car, and of course mileage. “Average UK annual mileage is around 8-12,000 miles per year. Doing a lot more will mean the car depreciates faster,” Buttle said.
Having several previous owners will lower the value. He added: “It means a greater chance of potential issues in the past.”warranty and service history also play a role. “Some manufacturers offer a seven-year warranty on new cars, which helps maintain resale value, as does a full service history.”
Smaller, more fuel-efficient cars tend to depreciate less. Buttle said: “They cost less to run and appeal to a larger pool of buyers.”
Larger, expensive luxury cars like SUVS typically cost more new, which means their value has further to fall, plus there are higher costs associated with fuel, parts and maintenance: “Less polluting cars incur less road tax, which makes them more appealing to buyers.”
Cars with widespread faults or manufacturer recalls are less appealing, as are old designs that have been superseded by new ones, Buttle said.
More than a third of new car buyers never even consider depreciation but they should take it into account , said Ben Wooltorton, chief operating officer at Insurethegap.com: “Depreciation hasn’t been much of an issue lately but that trend may soon reverse so it’s still worth bearing in mind.”
Even colour plays a part. “Generally, grey, black, silver, blue and white are the best colours for holding their value. Bolder reds and other off-the-wall colours may put some buyers off,” he added.
What Car? research shows the BMW 8 Series is the fastest depreciating car, with its list price of £111,650 falling to £38,950 after three years.
Carwow.co.uk reckons Land Rover models depreciate at the lowest rate, followed by Honda, Fiat, Mercedes,
Seat, Jaguar, Nissan,toyota,vauxhall and BMW.