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Prices of the UK’s most popular second-hand cars are soaring, amid a rise in demand and fewer new vehicles coming into the market due to a global shortage of computer chips used in car production.
As more buyers turn to the used-car market, the nation’s favourite cars have seen average prices rise by as much as 57% since 2019 amid surging demand, AA Cars said.
Britain’s best-selling used car — the Ford (F) Fiesta — now costs £9,770 ($13,484), up 31% on its 2019 value.
“With the exception of houses and some classic cars, things rarely go up in value as they age," said James Fairclough, CEO of the AA.
“Yet price growth in the used car market is so strong that some in-demand models are appreciating even as they sit on the driveway.”
In fact, the most in-demand models are appreciating with age.
A three year-old Mini Hatch now costs 57% more than a model of the same age cost in 2019. But a five year-old model currently costs 15% more than a three year-old car did in 2019, meaning it has gained in value despite getting two years older.
The first easing of lockdown restrictions in summer 2020 “unleashed demand” that had been pent up during the early stages of the pandemic.
Demand accelerated again this year as the economy improved and many people opted to drive rather than take public transport.
Auto Trader said levels of supply were down 12% last week versus 2019.
The shortage of micro-chips and other raw materials which is directly and dramatically impacting worldwide supply of new cars is having significant knock-on effects on the remarketing supply of used cars, it said.
According to its research, the average price of a used car increased 23.9% year-on-year on a like-for-like basis last week and the price of the UK's most popular cars have increased up to 57% since 2019.
Auto Trader’s data and insights director, Richard Walker, said: “With so much attention focussed on inflation right now, there’s huge interest amongst economists on those components that are recording substantial price rises, not least used cars which have been a notable driver of recent UK inflation rates."
“Whilst inflation in itself does pose a potential risk to consumer demand, we don’t expect to see price growth slow anytime soon.”
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He said this was based on "the continued acceleration we’re tracking across the market" fuelled, in part, by increased levels of household savings, a positive sentiment shift towards car ownership and the ongoing shortage in both new and used car supply.
Meanwhile, Fairclough believes that although average prices have risen sharply, it is still possible to get a good deal on the second-hand market.
“We advise anyone who is in the market for a used car to shop around widely and, when they have narrowed their search, to ask the dealer questions about the specific vehicle they are interested in.
“If they find out it has been sitting around on a forecourt for a while, the dealer may be more inclined to offer a price reduction."
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