Mind the gap – used car prices hardening further

It is intersting to note the parallels that can be drawn between the UK and US motor trade at present. As we regularly report used car prices are on the up, dealers are not taking in the ‘retailable’ trade-ins because they aren’t selling as many new cars and more dealers than ever are looking to the auctions to replenish their stock and as more buyers chase fewer cars this leads inevitably to price inflation. In the US dealers are saying similar things, demand for used cars has picked up to such an extent that sales are a staggering 25% up on the similar period last year and as the supply dwindlesthe same situation occurs. Eventually the gap between new and used cars will close so much that buyers will realise that the difference is so small that they would rather have a car exactly to their liking than compromise on a pre-owned model. How far away this is from happening remains to be seen as at present, both here and across the pond, the figures are still going in separate directions with February new car sales being 22% down year on year in this country and a staggering 41% down in the US.

It’s certainly possible that manufacturers will recognise this and hold back any major incentives for their dealer network in the short term and asses the situation at the beginning of the 2nd quarter. Our advice to potential buyers is that if you are looking to purchase a 6-18 month pre-owned car make certain, for your own peace of mind, that the difference in price between that and a new version is significant enough for that choice to be safely made. Unfortunately that saving will be open to interpretation as some people may think that a saving of £1,500 is enough whilst others would expect a much larger saving before considering a used car. The savings will obviously become bigger the more expensive the car and indeed in these credit crunch, eco-friendly days “smaller” and “more economical” are the buzzwords and the gap will surely be closer on a Corsa, Clio, Ka or Polo. The result of the comparison may just be the incentive to buy a brand new car.

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