10:09 am, September 5, 2008
USED car values are now falling faster than they did in the recession of the early 1990s.
A typical three-year old today retains around 38 per cent of list. In the 1990s, it was 40 per cent.
Why is this? Because we’re not suffering 10 per cent inflation. Makers are therefore not pushing up new car prices to counter depreciation.
EurotaxGlass’s managing editor, Adrian Rushmore, explains: ‘Between 1991 and 1992, manufacturers increased list prices by around 8 per cent, and this often helped to ‘drag up’ used car prices.’
‘By contrast, during the past year, new car list prices have increased by little more than 2 per cent. The general absence of inflationary ‘relief’ means that used car values have been more susceptible to pronounced month-on-month falls as demand has declined.’
It’s set to get worse, too. Used car values are likely to fall by at least 12 per cent between now and Christmas.
Nevertheless, Rushmore still reckons the market is suffering less than it did back in the ‘90s. Remember, between 1989 and 1992, new car sales fell by 30 per cent, with used cars suffering accordingly. Today, it is again falling, but in a much more controlled fashion.
The market remains in flux, though, with few knowing when the bottom will be reached. ‘Recovery will depend on another mix of factors – but it is already clear that an improvement is unlikely to happen any time soon,’ said Rushmore.
