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Used cars more affordable than ever

Secondhand cars have reached historic levels of affordability according to a special analysis of Britain's largest database of used car trade transaction prices.

It shows that, for the first time ever, the typical used car has fallen below a fifth of the average annual gross wage.

The figures are revealed by CAP, leading independent providers of benchmark vehicle values and technical information to the UK automotive sector.

The CAP analysis demonstrates the impact of an ongoing slide in used car value against income for the used car sector. This is caused, amongst other things, by new car oversupply piling downward pressure on secondhand values, despite the ongoing improvements in the quality and performance of all cars.

This is illustrated, CAP says, by the difference in value between a three-year-old Ford Escort and the superior Ford Focus. In 1997 a 94L plate Escort 1.6 LX, with 60,000 miles was valued in the trade at £4700. Eight years later a three-year-old equivalent Ford Focus is valued at £4,300. In relation to the annual gross average wage this represents a fall from 27% to 18.5%.

The same applies to Vauxhall Vectra, despite overwhelming superiority to its predecessor. For example, a 1994 L Vauxhall Cavalier 1.8 LS, with 60,000 miles, was valued in January 1997 at £4,775 while a 2002 52 plate Vectra 1.8 LS is today worth £3,475. In this case the car has reduced from 27% to 15% compared to the national average income.

The comparison is derived from personal income figures calculated by the Office of National Statistics and analysis of a basket of 120 vehicles from CAP's database – which holds more than 150 million used car values.

In 1997 the average used car trade value stood at just over 28.3% of the national average wage. Over the past seven years there has been a steady erosion of this value and today it stands at just 19.74%.

Mark Norman, managing editor of CAP Monitor, says: "There are always exceptions that buck this trend, such as the new MINI, but the general movement in used car values is downward in relation to average wages.

"One reason is general oversupply – which opens the door to intense price-led competition.

"Another factor is the reliability and quality of the cars themselves. They can now be run for longer without mechanical or bodywork problems so that a consumer's decision to replace their car is related more closely to desire than practical need. This can push a replacement car down the list of spending priorities.

"For the less wealthy private buyer the opportunity to own an extremely high quality vehicle is therefore growing. Our analysis shows that for the first time the typical three-year-old used car costs less than 20 per cent of the average UK gross wage.

"Overall, the used car market shares increasingly similar pricing characteristics with the so-called 'white goods' and consumer electronics sector, where increased performance, specification and quality are accompanied by ever greater levels of affordability."

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