According to the latest Auto Trader Price Index, the average asking price of used cars in Q1 2012 was £8,891, a fall of 3.9% on the same period last year.

This was due, it said, to more older stock and a decrease in newer, higher value vehicles. The volume of three to 10 year old cars was up 8% to 67%, while the volume of cars less than three years old was down 10% to 23%.

In January, the average asking price was £8,929, the highest it has been for five months, but in February and March prices began to drop. The average price of £8,862 in March was down 5.7% on March 2011.

The data reflects SMMT figures showing that, at the end of 2011, the volume of vehicles less than three years old was at its lowest since 1996.

Tim Peake, group strategy director at Auto Trader, said: “In this challenging market, dealers who succeed will focus not just on trade-plus pricing but also retail-minus pricing.”