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Why used cars have started rising in value

BY Harvey Jones

21st Jun 2023 Motoring

Why used cars have started rising in value

With the effects of the pandemic, used car values are rising rather than falling, in general. So what does the potential death of depreciation mean for you, as a buyer or seller?

Every motorist loves the feeling of driving away in a brand-new car, marred only by the knowledge that its value plunged the moment they pulled out of the dealership forecourt.

Depreciation is a dirty word, with new cars losing around 20 per cent to 30 per cent of their value within a year, and as much as half after three to five years.

"Used car values have been rising and some astonished owners have even sold their used motor for more than they originally paid"

Suddenly that's changed. Over the last two or three years, used car values have been rising rather than falling. Some astonished owners have even sold their used motor for more than they originally paid.

The valuation of a used Hyundai Santa Fe climbed nine per cent in 2021 and another 20 per cent last year, with a Mini One rising by eight per cent and 20 per cent over the same period, according to used car platform Motorway.co.uk

Effects of the pandemic on used car prices

Mini One carThe value of a used Mini One has risen in the last couple of years. Credit: M 93

The pandemic is mostly to blame as repeated lockdowns hit car production and supply chains, leading to a shortage of new motors and driving up the value of used ones. Used car prices grew by a third in the 12 months to April last year and although price growth subsequently slowed it’s now accelerating again, with the average used car price hitting £17,843 in April. Electric vehicles are the exception, with values falling due to surging supply as manufacturers race to bring new models to market.

"Electric vehicles are the exception, with values falling due to surging supply as manufacturers race to bring new models to market"

Used car appreciation is great news for used car owners who are looking to sell their old motor. Until it's their time to buy, of course.

For those looking to protect the resale value of their car or check whether a new purchase stacks up, Alex Buttle, founder of Motorway.co.uk, says the following factors all affect depreciation.

Hyundai Sante Fe carThe Hyundai Sante Fe is another car that used has risen in value considerably. Credit: Benespit

Number of owners

Cars with fewer former owners hold their value better. The more previous owners, the more people you need to have looked after the car.

Warranty

Some manufacturers now offer warranties running up to seven years, and that helps maintain resale value if still valid when selling. As does a full, recorded service history.

Size

Smaller, more fuel-efficient cars typically depreciate less. They cost less to run and appeal to a larger pool of buyers. Second-hand “run-arounds” used primarily for short, local trips are particularly popular.

"Smaller, more fuel-efficient cars typically depreciate less, as they cost less to run and appeal to a larger pool of buyers"

Larger, expensive luxury cars like SUVs typically cost more to buy, which means their value has further to fall. They also have more expensive fuel, parts, maintenance and road tax.

Emissions

Lower emissions means cheaper road tax. Many old Jaguars and BMWs are extremely cheap because their emissions (and therefore road tax) are high. Second-hand diesel values have dipped due to emissions fears.

In a new twist, used motors that are compliant with ultra-low emission traffic zones hold their value better. 

Condition

Once buyers spending more than £5,000 on a used car their expectations climb and they’ll want the paintwork, interior and tyres to be in decent condition.

Colour

Quirky colours are fun, until you come to sell. Grey, black, silver and blue cars hold their value better.

Land RoverLand Rovers have depreciated at the lowest rate. Credit: Navigator84

Models matter

Cars with widespread faults or manufacturer recalls are less appealing, as are old designs that have been superseded by new ones.

CarWow.co.uk reckons Land Rover models depreciate at the lowest rate, followed by Honda, Fiat, Mercedes, Jaguar, Toyota, Nissan, Vauxhall and BMW.

Type of vehicle

Dealers get better prices for trucks and vans, especially in good condition with low mileage, as they are harder to find on the used market.

Banner credit: Hyundai Santa Fe 

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