A strange article on aspokesmansaid.com:
Since the start of the decade, the price of the average second hand car has risen by more than 40% due to an excess of cutting edge models available on a pre-owned basis. The average price of a second hand motor is now a STAGGERING £13,000, as dealers are selling vast numbers of nearly new vehicles, rather than malfunctioning old bangers.
Some are attributing this increase in price to the advent of pay-monthly finance deals for new motors, which is leading to a higher turnover of new cars. As the era of car ownership starts to end, with “usership” becoming the new industry buzzword, motorists are hanging onto their vehicles for a fraction of the time they once did.
New models available second-hand despite being just one or two years old can still demand MASSIVE prices, driving up the average cost of everyone’s favourite old reliables. That’s backed up by research from Auto Trader, who report that sales of used cars that are less than 3 years old have increased by a massive 32% in the past five years alone... the average price of a new car is now £26,105―meaning that even with these price increase, canny drivers can still save BIG by shopping around and buying second hand.
What is strange about the article is that it's not clear whether they think this is A Bad Thing (price of second hand cars is up, true) or A Good Thing (plenty of three year-old cars to buy for those who want to save 50% off list price, also true).
This is because they are doing a diagonal comparison - the typical second hand car eight years ago was 6 years old and sold for £9,000, today it's three years old and sells for £13,000 (or something like that).
On a like-for-like basis, i.e. the second hand price of an X year old car today compared with the second hand price of an X year old car eight years ago, it strikes me that second hand car prices must have fallen, which is A Very Good Thing Indeed AFAIAC.
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To put this in perspective, according to the SMMT's excellent Motor Industry Facts, new car registrations have been between 1.9 and 2.5 million a year since the year 2000 = about 30 million new cars = about as many as there are still on the road = average age of a car on UK roads is 9 or 10 years.
The number of cars on the road has increased from 25 million to 31 million over the last 18 years (see previous link), meaning that nearly as many are scrapped (or exported) as there are new registrations.
Big Green Bills
1 hour ago
15 comments:
Another factor: cars are VASTLY better built nowadays, and in particular are much better rust-proofed. I have a 15 year old Skoda. There have been ZERO rust problems on it. That would have been unheard of 30 years ago.
SM, good point and agreed. But the new price of cars has flatlined for a decade or two. The quality improvements are 'free'.
For every winner there is a loser in this game. It's whether the car finance sector is going to blow up that matters and that is not really referenced here
G, there is no such thing as the "car finance sector". It's just the big manufacturers allowing people to pay for their new cars in instalments that are broadly in line with resale values. The net loan is always approx. equal to the resale value. It's not in any away leveraged speculation on rising asset prices like land (or dot com bubble, tulip bulbs etc).
MW. "..the quality improvements are free..". Capitalism wins again. Doing more for less every day.
L, the quality of new cars (fuel economy, acceleration, comfort) never ceases to amaze me, despite being cheaper in real terms. I still prefer old ones with a soul though :-)
@MW - 'the quality of new cars'.... not just cars, pretty much anything you care to mention.
I cycle, have done for years 'n' years (I once WASN'T a mamil but that was a long time ago) and bikes now are technically awesome compared to back in the day..... multi gears, clutched mechs, disc brakes, carbon fibre everywhere, belt drives etc etc. Old bikes are still 'desirable' for much the same reason as old cars but in performance terms they suck.
@L capitalism? Well its not strictly capitalism (i.e. ownership) its a free and competitive market that does it, surely.
Sh, correct on both points.
The soul of a car is becoming far more important to me than it’s performance.
@MW
And of course if we had had socialism and government direction of industry (a la Corbert, Vince or T'resa who are all from the same big state/industrial policy mould) for the last 30 years we'd all be driving Austin Allegros or, worse, Trabants.
Shiney. 'capitalism' - I should have posted 'competitive capitalism', i.e. making the essential nod to 'private markets'.
JH, the soul of a car was my only ever yardstick. You get in, it loves you or it is coldly indifferent.
Sh, I sat in a Trabant once, it wasn't even coldly indifferent, it actually hated you. British Leyland might have just as bad.
*been*
@L
That's the ticket.
No such thing as a car finance sector is a bit of a quibble. Your PCP is with a finance house rather than a car dealer or manufacturer. The Bank of England and the PRA have both been worried about these plans
"2.9 Motor finance has seen the fastest expansion among consumer credit products, where a key
factor has been the growing popularity of Personal Contract Purchase (PCP1) deals, which now
account for around 80% of gross flows for new dealership consumer car finance (Annex, Chart 4).
PCP creates explicit risk exposure to the vehicle’s residual value for lenders,
2 who typically offer a
guaranteed future value (GFV) for the vehicle. Gross GFV exposure is estimated to be around
£23 billion across the industry, and GFVs are typically set in the range of 85-95% of the vehicle’s
expected future value (with a minority higher than that). PCPs written at the high end of this range
are particularly exposed to a significant downturn in the used car market, possibly outside historic
experience (used car prices fell by up to c.20% in the crisis, before recovering). An initial fall in prices
could lead to a surplus of used cars coming to the market, which could further weaken prices and
cause material losses to lenders through their GFV risk."
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