Whilst the new car market feels the pinch from the new Worldwide Harmonised Light Vehicle Test Procedure (WLTP) regulations, the used car market continues to show its resilience. Data from the Auto Trader Retail Price Index, revealed that the average price of a second-hand car reached a record high of £12,853 in September; a year-on-year increase of 5 per cent.
It follows a period of sustained growth for used prices, which have grown twice as fast as their new counterparts since the start of the decade. The average price of a used car has risen from £8,997 in 2011, to £12,731 in 2018, a significant 42 per cent increase in just seven years. In contrast, the average sticker price of a new car has grown just 19 per cent during the same period (£21,911 to £26,105).
The growth in average used prices can be attributed to knock-on effects of the rise in new car finance, which in 2017 accounted for 88 per cent of all new cars bought in the UK, compared to circa 50 per cent of sales a decade previously. With the average two to three-year ownership cycle of a Personal Contract Purchase (PCP) contract, there has been an increase in younger, more advanced and, crucially, more valuable, second-hand cars entering the market, driving average prices up.
Modern second-hand cars are increasing in popularity, helping to drive overall used car sales volumes in recent years. Over the past five years, sales of used cars aged less than three years old have increased by nearly a third (32 per cent), whilst sales of five-year-old and ten year-old-cars have dropped by three per cent and 7 per cent respectively.
In terms of specific fuel types, the average price of a second-hand diesel in September was £14,551; a 4 per cent like-for-like increase on the same period last year. For a used petrol car, consumers paid £11,043 on average last month, which was a 6 per cent year-on-year increase.