At MoneyWeek, we’ve never been keen on the idea of buying our cars brand new. It always seemed a lot of extra money to pay just for that ‘new car’ smell. But for the time being, we might have to revise our opinion. Because new cars are starting to look cheap.
In April, used-car magazine Parkers reported that many new vehicles were actually cheaper to buy than second-hand ones as manufacturers slashed prices to stave off the recession. Since then, the gap has grown even wider. That’s because, not only has demand for new cars fallen, but the supply of old cars has been hammered for two main reasons. There’s the government’s scrappage scheme – whereby a banger at least ten years old can be traded in for a guaranteed £2,000; and then there’s the fact that companies are holding off replacing their company car fleets, which means fewer second-hand cars are hitting the market.
So the normal rules, which see an average used car lose 15% of its value every year, have been reversed. Indeed, Tim Naylor of British Car Auctions tells The Telegraph that “prices have gone up between 25% and 30% depending on the car”, which is “totally unprecedented”.
One thing’s for sure – it won’t last. The scrappage scheme will run out of funds, perhaps as soon as October, and normality should then start to be restored. But in the meantime, if you get a move on, now could be the perfect time to upgrade to a new car if you were thinking of switching anyway. After all who needs the hassle and potential expense of running a car they haven’t maintained, when you can get the peace of mind, and dealer warranties, that come with trading in your old run-a-round for a new one?