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Wages rise faster than car prices

Car prices are failing to keep up with inflation.

Prices for new cars are up 0.1%, year on year and inflation is running at 1.6%, according to the latest What Car? Price Index.

The annual rise of inflation is 3.1% and average earnings have gone up by 4.4% over the same period.

The three prestige classes and small cars are the only sectors to have risen in price over the past year. All other classes have become cheaper.

City car prices have fallen by 2.6% and superminis are selling for 2.4% less than a year ago as dealers chase a decreasing number of buyers. Sales in both classes have fallen during the same 12 months - superminis by 3.9% and city cars by 7.1% - according to the Society of Motor Manufacturers and Traders.

Second-hand car prices have slid to an all-time low for the third month in a row, but the rate of decline has slowed slightly.

This month, nearly new car prices fell by 1.8%, compared to a drop of 2.5% last month. The average used car, meanwhile, has become 2.6% cheaper this month after a fall of 3.1% in the previous month.

"Over the year, nearly new cars have shed 7.5% of their value and used car prices are 7.4% lower. So, however you cut it, prices are in the bargain-basement and still tunneling," says What Car? editor David Motton.

MPVs have fallen hardest, with nearly new examples 15.5% cheaper and used prices 11.2% lower, year on year. Supermini values were also hit badly: nearly new down 9.9%, used down 9.4%.

Used 4x4s (down 12.2%), used family cars (down 9.4%) and nearly new city cars (down 9.3%).

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