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Used cars prices hit 'extraordinary' record average high above £16,000

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The average price of used cars soared by more than a fifth last month to a new record high of just over £16,000 following the fallout from coronavirus and supply chain problems.

Richard Walker of AutoTrader, which compiled the figures, said: “What we’re seeing in used car pricing is extraordinary. In any normal circumstances a car begins to lose its value as soon as it’s driven off the forecourt.

“However, exceptionally high levels of consumer demand in the market, coupled with new and used car supply constraints, mean what is traditionally a depreciating asset has become an appreciating one.”

A lack of vehicles and cash-rich consumers sitting on financial reserves built up during lockdowns have contributed to the higher prices.

Government advice to avoid public transport has also increased demand for vehicles, helping fuel 18 consecutive months of price increases.

Prices had been rising by several percent every month since the first coronavirus lockdown early last year.

However, increases suddenly accelerated in June as the scale of the shortage of chips used in new cars became clear, causing supplies of new vehicles to dry up.

With fewer brand new cars available, motorists were driven to the used market, sending prices surging.

In June the year-on-year price increase broke into double digits, rising 11.1pc, followed by rises of 14.1pc in July, 17.2pc in August before September’s incredible increase of more than a fifth.

Mr Walker added: “While a mere 6.1pc price growth was enough to set records in August 2020, this pales in comparison to last month’s mammoth 21.4pc, the highest ever monthly price increase.

“Not only are we recording a huge surge in consumer demand - fuelled, in part, by the increased levels of household savings, a positive sentiment shift towards car ownership, and the 1.5m ‘lost’ transactions last year as a result of the various lockdowns – but we’re also seeing cars sell faster than ever before.”

A normal year sees about 8m used cars change hands, and AutoTrader is predicting 7.8m will be sold this year, a level Mr Walker called “remarkable”in the face of supply constraints.

The company analyses pricing of 900,000 vehicles a day to compile its figures and believes the price increases are likely to continue until current problems with supplies of semiconductors for the automotive industry are resolved.

Shortages of these vital components have been caused by a combination of car companies cutting back orders when the pandemic was at its most intense, then being caught out when demand bounced back faster than anticipated.

Car production lines around the world have had to shut because of a shortage of chips, and the squeeze is not expected to ease until next year.

Motorists buying new cars have been quoted waiting lists of up to a year, rather than weeks, because of the problems, and some models are just not available as manufacturers funnel chips they do have into more, expensive and higher margin models to preserve profits.

According to AutoTrader, the model to record the biggest price rise over the past year was Jaguar’s XK, a sports car discontinued in 2014.

Average selling prices for the car rose 52pc in a year to £28,196, followed by the Hyundai i30, a family hatchback, which went up 38pc to £12,051.

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