Drivers hit with ‘used car premium’ – used cars costing up to £26,000 more than new models
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Motorists in the UK have to spend much more money on used cars compared to new vehicles due to huge interest rates and long waiting times for newer models. Drivers could face paying as much as £26,000 “used car premium” as manufacturers warn of year-long waits for new vehicles, The Telegraph reported.
A combination of demand from drivers unwilling to wait for new models, and higher interest rates forcing up debt repayments has led to a huge increase in costs.
Large numbers of second-hand vehicles, which typically lose value over time, have increased in price and are now more expensive than brand new equivalents.
Santander Consumer Finance now charges 7.85 percent interest on a second-hand car, up from 7.69 percent last year.
This is expected to keep on increasing as interest rates rise further.
Rates for new cars have fallen to 4.3 percent from 4.7 percent, although buyers must wait months, or even years, for the keys.
A lightly-used modern Land Rover Defender with 10,000 miles on the clock cost around £72,000.
New models sell for less than £62,000.
On a three-year PCP deal with a £10,000 deposit, used models now come with a premium of almost £26,000 to a brand new model, due to the gap in interest rates and purchase prices, The Telegraph reported.
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Similarly, a one-year-old Dacia Sandero, Britain’s cheapest car, having done 10,000 miles, costs £12,481, according to valuers Cap HPI.
Consumers would pay £312 a month on a three-year PCP deal charging 7.85 percent with a £2,500 deposit.
New models have a list price of £10,173 but cost £228 a month at a lower 4.3 percent rate.
Overall the used model would cost £5,333 more.
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Auto Trader reported that it had seen a 31 percent spike in the price of used vehicles listed on its website compared to a year ago, while rival online sales platform CarGurus said it has tracked values increasing 26.3 percent over the same period.
Car makers have simply been unable to build enough cars to meet demand from customers.
Auto Trader estimates that 1.5 million new sales alone have been lost since the semiconductor shortage hit.
With attention switching to second-hand cars, used vehicle transactions were up 11.5 percent to 7.5million purchases in 2021, which is 778,000 more than the previous year, the Society of Motor Manufacturers and Traders confirmed this week.
This has decimated dealer stocks of second-hand cars, meaning increased competition for available used motors, which also means higher prices.
Professor David Bailey, an economist at Birmingham University, said used car repayments would continue to rise if the Bank upped rates again later in the year, as is widely expected.
Steve Fowler of Auto Express, a car magazine, said there was “light at the end of the tunnel” but wait times were still stretching in many cases “until the end of the year and beyond”.
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