Used car prices rise by nearly 18 per cent

Used car prices have risen by nearly 18 per cent on some makes and models since January 2011.

The reasons given include rising inflation increasing fixed costs for dealers, VAT increases and a shortage of good quality used car stock.

The conclusion comes from Motors.co.uk, based on a review of 30,000 advertised prices on it website between January and May across the top five makes and models, Audi, BMW, Vauxhall, Volkswagen and Ford.

The data – which shows prices for the top five makes and models listed for sale on motors.co.uk split by seven mileage bands – shows that in over 70% of cases, there has been an increase in asking prices.

On vehicles with mileage of between 10,001 and 20,000, the top five models with the largest price increases are:

• Audi A6 - 17.9 per cent
• Vauxhall Zafira - 13.4 per cent
• Vauxhall Astra - 8.7 per cent
• BMW 3 Series – 6.4 per cent
• BMW 5 series – 5.8 per cent

Dermot Kelleher, head of research at Motors.co.uk, said: "Advertised used car prices on motors.co.uk have increased by nearly five per cent on average since January 2011 and there are a number of factors that we believe are influencing this.

These include rising fixed costs for dealers like energy, fuel and insurance, as well as a shortage of good quality used car stock driven both by the reduction in new car sales from 2008 onwards, and the fact that in the current economic climate, consumers appear prepared to hold on to their vehicles for longer.

“Clearly in an industry driven by volumes of transactions, these factors combine to produce extremely challenging trading conditions for dealers - with asking prices squeezed upwards in order to compensate for the reduction in volumes.

"However, it needs to be remembered that from a car buyer perspective, they are also under economic pressure and are looking for the best and sometimes lowest price on the things they purchase, as their pockets have been hit too by a sharp rise in inflation.

"Together with the generally held misconception as to the amount of profit that a dealer makes per car being higher than it actually is, this consumer desire to drive down the asking price at point of sale jeopardizes potential sales even further.

“In our view, in order to overcome this issue, dealers need to both explain to potential car buyers what is going on in terms of lack of supply and demand in the used car market at present and realign the consumer expectations as to how slim the dealer margin actually is.

"They would also be well served by providing advice to car buyers on how they can save money on the cost of motoring and educate them on the running costs of a vehicle, so they can see beyond the purchase price.”

Percentage increases in advertised prices of the top five most advertised makes and models on Motors.co.uk: