Used car prices: A guide to the UK market

Used car prices: A guide to the UK market

28 May 2018 Concept Car

Are used car prices going up or down? It seems even experts can’t agree on this. For the past decade, the used car market in the UK has steadily grown. Today it’s the biggest in Europe, even eclipsing Germany’s by a considerable margin. And yet, pricing has remained hard to understand, hard to predict and hard to come to terms with.

It is no surprise, then, that consumers are unhappy. In fact, the average car buyer spends almost thirty hours of research before clinching the deal. But 50% still think they overpaid in the end.

Clearly, prices remain a contentious issue

Are you, too, trying to understand the logic behind used car prices? In this article, we’ll explain what determines the costs for a vehicle. We’ll show you why and how the market has changed and why it will continue to change.

And finally, we’ll recommend a strategy that should make you more satisfied and content with your car buying decisions.

If you’re looking for more information, you can also take a look at our Best Price Guide for Used Cars.

Prices have become political

As mentioned, the UK car market is the biggest in Europe. And this despite the fact that Germans are still buying a lot more cars than we do. There are various reasons for this.

A more recent one is the recession of 2009, which hit the new car market hard. Secondly, a string of innovative, albeit controversial, financing tools have put used cars at the disposal even of those with bad credit. And finally, used car prices have remained competitive, partly because of the beneficial influence of the Internet.

In the age of mobility, access to used cars is an important factor. This is why the government have cracked down hard on dealers trying to exploit customers. Various financing schemes are under scrutiny. Most importantly, the practise of selling potential buyers loans they can not repay has become the target of political action.

It is because of this concern for more customer protection that the UK used car market has become extremely stable.

Unfortunately, used car prices have remained problematic

It is clear from the start that used car prices will never be popular. Although the second hand market offers excellent deals, even a used car is a major expenditure for most households. This simply won’t change just because politicians have pledged to restrain dubious dealers.

Even considering this, car pricing remains a strangely complex topic. A recent article in the Financial Times explained convincingly why newer used cars were losing their value more quickly and why this trend would continue for the foreseeable future.

Yet only a few months later, Business Car was happy to report that, in fact, the price of used cars had risen. In fact, market analysts spoke about ‘the strongest movement into March since the advent of Black Book Live in 2012’ as well as an ‘unprecedented strength in values’.

Little wonder buyers are confused.

What about transparency?

It is surprising, meanwhile, that the Internet hasn’t long challenged and changed all of this. It is certainly true that the increased transparency that online comparison sites have brought has revolutionised the market.

As car dealer publication vauto recently stated: “Most dealers, like other retailers, have embraced the Internet’s influential role in attracting vehicle shoppers and driving them to their showrooms to purchase vehicles.”

So shouldn’t used car prices be easy to understand now? Shouldn’t they almost be the same everywhere, as dealers try to outbid each other?

Interestingly, this is not the case

One reason is, simply, that not all dealers have yet arrived in the digital age. According to vauto: “While many dealers understand that transparency matters for today’s vehicle buyers, they have yet to change showroom processes to reflect it. For many customers, the hard-sell tactics and surprises they encounter in these dealerships is a turnoff.”

Also, there are still various factors that can cause widely different used car prices despite the transparency the web has brought. We’ll take a look at those in a second.

First, though, let’s investigate the biggest point of controversy on the car market: PCPs and how they have impacted used car prices.

The Arrival of PCPs

The abbreviation PCP stands for ‘Personalised Contract Purchase’. The concept is a lot more simple than the term. Essentially, under the conditions of this arrangement, you’re no longer buying a new car outright. Instead, you’re borrowing it for a period of about three years. There is usually no deposit. Monthly instalments are calculated on the basis of the expected value of the vehicle after three years. After that time has elapsed, you can decide to pay off the car and keep it or to switch to a different one.

PCPs are still a fairly new financing instrument. A few years ago, no one had even heard of them. Today, the account for almost 80% of the market. PCPs are applied to new car sales only at the moment, with very few exceptions.

However, they have implications for the used car market as well. After all, most customers can not afford to buy the vehicle after the lease has ended. And so, as with a leasing arrangement, the car is sold off by the dealer.

How PCPs have changed the game

Since PCPs have allowed many thousands of cash-strapped Britons to buy a car they could otherwise not afford, this has caused a dramatic rise of used cars on offer. In the long run. this should eventually send prices spiralling down.

At the moment, this isn’t reflected by the market at large yet. But the trend is certainly visible for the more popular models, such as the Ford Fiesta. As a dealer speaking to car publication Whatcar explains:

“The cars are going for less than they should because of the market conditions. It’s supply and demand. Even the part exchange values customers are being offered aren’t worth what they expected because of the change in the market. It means that instead of upgrading their cars, they’re often forced to stick with what they’ve got.”

To make things even more complicated, there are several other factors influencing used car prices. Let’s explore these now.

Used Car Prices – Factors of influence: Regionality

Hard to believe, but where you live may well be the most important factor driving used car prices. Regional variations in price can be remarkable, far exceeding the subtle differences between different dealers in the same city. According to used car guide CAP, these variations can be so pronounced that some sellers are making a profit by snapping up hot deals in one place and selling them off in another part of the country!

Car Dealer Magazine has reported that car prices are lowest in and around Liverpool and highest in Plymouth. Dealers in Plymouth were five percent more expensive than the national average. In some cases, this can translate to a difference of up to 1,000 Pounds for a car.

This is why some experts recommend you expand your search beyond the limits of your town. If you’re able to travel to keep the price of a used car down, you probably should.

Used Car Prices – Factors of influence: Fuel type

Used Car Prices - Factors of influence: Fuel type - Concept Car Credit
Another factor driving used car prices is fuel type. Generally speaking, over the last years, petrol cars have gone up in price, whereas diesel prices have dropped. This is easy to understand. With the government quickly reversing its original diesel-favouring strategy, there is even talk of an outright ban on diesel engines or at least of severe restrictions on their use.

As customers are increasingly uncertain about the future of diesels, their value has plummeted. In 2017, petrol cars gained almost 10% in value on average. Diesels, on the other hand, lost more than 5%.

if you’re looking to make a bargain and are confident about the government’s diesel policy, you should seriously consider one right now.

Used Car Prices – Factors of influence: Inflation / Currency Fluctuations

The European Central Bank is still desperately trying to keep deflation to a minimum. But, as the BBC report, inflation and the low value of the Sterling are partly to blame for the relative strength of car prices. Some specific car types, mostly larger people-carriers, have risen in price by more than 12%.

So, although inflation and currency fluctuations may not be the first item in your radar when thinking about buying a car, you should definitely keep them in mind.

Used Car Prices – Factors of influence: Month of Year

Another factor driving used car prices is the month of year. Yes, you heard right: It can make a considerable difference when you’re buying your car.

According to an in-depth analysis by website Market Oracle, the period between mid-November until the end of January is best by far for purchasing a new vehicle. Astoundingly, you can get a 5% discount on the yearly average withing this period!

The simple reason is that dealers want to clear their inventory and improve their balances before the end of the year. This means they’re more willing to accept a smaller margin as a trade-off.

The worst time of the year, meanwhile, are the Summer months from May to the end of August. During the Summer, many families are keen on buying a new car so they can use it to enjoy their holidays with it. Supply and demand, again.

How to find the best prices: Your strategy

Now you know about some of the most important drivers behind used car prices, it is about time to set up a strategy. After all, what’s the use of knowing how used car prices come about, if you can’t put this knowledge to your advantage?

A car buying strategy should involve the following phases:

  • Deciding on the best car to buy
    This should include considerations such as fuel type, model and make as well as which extras are truly vital for you.
  • Arriving at an estimation of the value of the car
    Perform research, starting online. Websites like parkers, Glass’s Guide, Used Car Expert and Confused are excellent points of departure.
  • Determining potential dealers
    However, most online websites will not assist you with the financing part of the equation. This is why you should always include physical dealers in your considerations as well. Visit a select group of them and then leave 2 to 3 for the final round of the process.
  • Following the development of the price over the course of weeks or even months and then buying at the opportune moment.

Market based prices at CCC

At Concept Car Credit, we have always been convinced that the divide between online and physical has long been obsolete. This is why all of our current offers can be found on our website. We also believe that transparency is key to customer satisfaction. This is reflected by recent surveys indicating that transparency was the most important factor influencing buying decisions for 76% of all car buyers.

Which means that you can browse our digital showroom, appy for finance and then visit our physical store in Manchester and walk away with the perfect car for you the same day. We won’t try to sell you anything you don’t want and since we’re not a garage, we have no interest in selling you a vehicle that will need to be repaired constantly.

Any more questions on our used car prices? We’re there to help.

28 May 2018 Concept Car