RAC Cars News


Report compares new and used car prices

By raccars Published

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A study has looked at how low interest rates are impacting new car prices in the UK.

The cost of car ownership is something that British drivers must weigh very carefully when deciding which vehicle to buy and what finance package to pick. And a new report has unearthed some interesting figures which suggest that the prolonged impact of low interest rates is causing some interesting changes in the UK’s automotive market as a whole.

Looking at the specific parameters under which the conclusions of the report were drawn is important before getting into the figures themselves, in order to put the report into context.

Analysts based their findings upon new cars purchased with HP (hire purchase) and PCP (personal contract purchase) finance agreements, while comparing these against equivalent used car deals. The report also makes the point that the circumstances of individual buyers as well as the packages that are available can have a significant impact as to which route to car ownership is the most affordable for a given individual.

Balancing act

Within the conditions of the study, it was found that in 29 per cent of cases it would be cheaper for buyers to select a new car rather than a used model of the same make and specification. However, in this instance the used model had to be a year old in order to potentially cost more than its new equivalent in almost a third of cases.

This suggests that a minority of nearly new cars can potentially represent a greater financial burden than their brand new counterparts. The report cites specific models including the Kia Picanto SR7 and the Nissan Micra Acenta as falling into this category. And this information will certainly be food for thought for some buyers, provided that they fall into the fairly narrow set of parameters dictated by the report.

Industry analyst Jim Holder said that ownership of a new car could be cheaper than selecting a used car, if consumers are willing to put sufficient effort into researching their purchase. He also said that the state of the market as it is today is largely down to the low interest rates which make finance repayments affordable for consumers, in combination with the incentives being offered by manufacturers to stimulate new car sales.

Cost calculations

Of course the cost of a car is by no means solely associated with new car prices advertised by dealerships. With the exception of cash purchases, buyers will invariably have to factor in the cumulative expense of monthly repayments and the associated interest on finance packages, whether they choose one of the HP or PCP deals that are so popular at the moment, or they instead opt for a loan from a bank or independent provider to cover the cost of the vehicle.

Crucially, the report found that in most cases even if buyers could save money by selecting either a new or a used car, depending on their specific circumstances, the amount that is saved may be marginal when compared with the total cost of the vehicle. Although of course for affordable models this will almost certainly have a greater influence in the final buying decision.

For used cars of more than a year old, the likelihood of a new equivalent being more affordable greatly diminishes. This is why even with new car sales increasing by 13 per cent in July of 2015, the used market is also thriving as new and used models alike are chosen by millions of eager buyers nationwide.

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