RAC Cars News


How Inflation has Affected Car Prices

By raccars Published

Mini Estate

We are all aware of depreciation but how do car prices fit in with the rate of inflation?

Car prices in years gone by

Everyone remembers the family cars in which they were taken to school, went on holiday, or even learned to drive. These memories may be nostalgically viewed through rose tinted glasses; alternatively, they may be tinged with disbelief: No seatbelts? Manual chokes? So, are today’s car buyers getting value for money, or did our parents and grandparents live in a rather more golden age of motoring?

Taking all the available data into consideration, it seems that car prices have, in reality, remained fairly consistent over the years. Of course, today’s cars come with an often bewildering selection of features that previous generations could only have dreamed of. But even factoring that in, car buyers aren’t doing as badly as the ‘your new car is worth thousands less as soon as you drive off the forecourt’ horror stories may suggest.

More bang for your buck

Car prices have stayed roughly in line with inflation over the past couple of decades. And when you consider the seismic leap technology has taken over the same period, we now enjoy vehicles with an astounding level of performance, economy, standard kit and safety levels. In reality we have seen an improvement in the bang we are getting for our buck.

Dreaded Depreciation

Depreciation is essentially the variance between what a car is worth on the day you buy it, and the day on which you sell it on. This fall in value varies dramatically depending on the model. Selecting a car that is likely to hold its value is certainly the way forward, and may well save you more money than if you choose a car based upon fuel efficiency or running costs alone. It really is worth taking advice and doing some sums before signing on the dotted line for your new car, as over time there are savings to be made if you’re canny.

Associated Costs

However, while the cost of a car may have remained close to or slightly below the rate of inflation, the same cannot be said for insurance, oil, fuel and car tax prices, all of which have risen far above the inflation rate at one time or another, hitting many drivers where it hurts.

The cost of insuring a car has almost doubled in recent years. Had it stayed in line with inflation, the hit to your wallet to insure that dream car would be significantly less painful. Indeed, over recent months we have seen a sharp rise (on average 14 per cent) in the cost of motor premiums, although there are welcome signs that this rise is now easing off.

Similarly, although the market inevitably fluctuates, a trip to the filling station can cost what seems to be an eye-watering amount compared with the halcyon days gone by, although there has been some respite in recent years. However, it seems that petrol prices are on the rise again, after their fairly dramatic fall in 2104/2015. This is largely attributable to the cost of oil, which has, regrettably, started creeping up again. As alternatively-fuelled vehicles (AFVs) increase in popularity, there should be some overall reduction in the fuel component of the cost of motoring.

Value for Money

Ultimately, when you think of just how far cars have come in terms of reliability, comfort, safety, entertainment and technology right across the board, you will probably feel that your current car represents great value for money. This is particularly true when compared with the boneshakers of our parents' and grandparents' generation.

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