CAP analysts examined the values of seven-year old cars – the average age of Britain's car parc - in February 1997 and compared them with their equivalents in age and model in February 2004. They found that today's seven-year-old cars are worth anything up to 50% less than their equivalents were in 1997. This is despite the unarguable improvements in the build quality and reliability of a car registered then, compared with those sold new in 1990. CAP's analysts identified a range of factors influencing the changes in depreciation trends, which include:
- Today's cheaper personal finance - Shorter vehicle lifecycles - Lower running costs for newer cars - Increased supply/availability in today's used car market
CAP Automotive Analyst, Carl Dadd, said: “Personal borrowing is cheaper today and this, coupled with an overall increase in personal wealth, means consumers are more able to choose a newer car. This therefore re-directs demand toward newer cars. “Car lifecycles have also shortened, with models replaced around every five years now, rather than the old seven year lifespan for a model. This has the effect of making models age more quickly in the eyes of the consumer. Consumers are also inevitably drawn to newer cars due to expectations of lower running costs through improved fuel economy, less likelihood of expensive repair needs and vastly improved specification.
“Overall market conditions have also changed. The mid-to-late 90s were ideal for durable residual values. Our sample was formed of seven-year-old cars, originally registered in 1991, during a period of relatively low new sales which was followed by a rising economy. The seven-year-old cars in the later sample, registered in 1997, have not benefited from the same conditions.
“When you consider the rises in list prices since the late 1990s, the modern used car represents an undeniable bargain in comparison with those of a decade ago. Conversely, as a new purchase, today's cars lose value much more quickly.
CAP Monitor reviews changes in seven-year old cars with 80,000 miles, comparing February 1997 values for 1990 'G' plate vehicles with this month's for 1997 'P' plates. A 1997 Mondeo 1.8LX at £1,175 is worth £675 less than its 1990 Sierra equivalent was seven years ago. Comparable Vectras at £1,550 and Toyota Carinas at £1,275 have lost £825 and £1,325 in value respectively.