RAC Cars News

#WeLoveCars

Successful New Car Market Sending Used Car Prices Up

By raccars Published

Image Source

While Britain's booming motor industry and its contribution to the wider economy of the country are something surely to be praised, specialist valuations firm Glass's is warning of an undesirable knock on effect to the used car industry.

New car sales are recorded by the Society of Motor Manufacturers and Traders (SMMT), which has revised up its 2014 whole year forecast to 2.4 million units, an 8.1% rise on 2013's new car sales. However according to Glass's, the roaring trade in new cars in the UK is unsustainable and is having a damaging effect upon the used car market.

The firm claims that about four out of every five new cars are bought on credit, usually a personal contract purchase (PCP). This is essentially a leasing scheme, which requires customers to pay a deposit and make monthly payments over a set term - usually three years - with a final lump sum to be paid to terminate the agreement and take ownership of the car. Manufacturers have been strongly pushing these deals and are now going even further, by offering customers early termination of their existing PCP in order to sign up for a new car and new deal.

Glass's believes that such arrangements are tempting customers to buy new, who would usually go for second hand cars, and tempting others to replace their existing car sooner than is customary for them. Furthermore, 2009-2010's used car scrappage scheme pulled in other out of the ordinary new car buyers. According to Glass's this has led to an artificially inflated new car market and lower demand for used cars, while at the same time, putting a large number of used cars into the market now, a few years later.

For customers looking for a used car this is good news, as prices have dipped and sellers could be more prepared to accept offers. While the summer usually incurs a seasonal lull in demand that sees average used car prices fall by about 1.5%, that has doubled this year to 3%.

Investigations by Glass's have shown that Britain's recovery from recession is stimulating the new car market, which has the inevitable effect of flooding the used car lists, the obvious result of which is oversupply coupled with under demand. The company believes the situation in continental Europe could exacerbate the problem, as manufacturers desperately trying to counter the effects of the recession attempt to capitalise on the strong pound by offering discounts to the UK.

Looking to Buy?
Search for cars