When will car prices drop?
Last updated September 29th, 2023
In recent years, the prices of both used and new cars in the UK have seen steep increases.
According to research from personal finance website Nimblefins, as of September 2023, the average new price for the three best-selling UK car models was £21,415 – around £6,000 more than just three years previously.
Whilst used car valuations are falling (used prices fell by 2% in August 2023) there are no signs of an impending ‘price crash’.
This has led to many people pondering the question, “When will car prices drop?”
In this guide, we will analyse the current market trends for car prices. We’ll also explain the various factors that can contribute to car price increases, when new and used prices might drop – and whether now is a bad time to buy a new motor.
Value your car in under 30 seconds
Will used car prices drop?
According to Cap HPI’s Director of Valuations, Derren Martin, used car values declined by 2% (or around £400) in August 2023. However, Martin added, “You’ve got to put it into context; values are still high and on average 25% more than they were three years ago.”
The used price drop in August was only slightly ahead of the 1.9% decline seen in July, indicating that the current rate of downturn is gradual.
What causes used car prices to increase?
- Inflation: When interest rates rise, drivers utilising car finance will have to pay more interest.
- Low used stock: As fewer new cars are sold (whilst leasing and financing become more popular), this leaves a smaller stock of used cars, which in turn, leads to used price increases.
- Supply and demand: Consumer demand outweighs the supply of used vehicles, leading to price hikes.
- COVID and supply chain issues: During the COVID-19 pandemic, used car sales fell drastically, due to concerns around whether they could be sold safely with social distancing in place. Then, once restrictions ended, demand soared, causing prices to rise.
- There was also a global semiconductor shortage during the pandemic, which significantly stifled new car manufacturing. This had a knock-on effect on the used market, driving up the demand for used cars.
When will used car prices drop?
Used car prices actually fell by 1.4% in June due to the market ‘getting back to normal’ - and the hot weather discouraging people from buying a car, according to Cap HPI’s Director of Valuations, Derren Martin. Therefore, it is believed that prices will continue to drop at a steady rate. However, there will be no ‘crash’ in the immediate future.
Is now a bad time to buy a used car?
Prices are slowly coming down after their meteoric rise in 2021-22, caused by the pandemic putting the economy into turmoil.
Although used car prices are now below their peak level, they remain higher than at any time before 2020.
What causes new car prices to increase?
Paragraph
-
Inflation
As a result of inflation, general prices are rising in the UK – and new cars are not exempt from this.
-
Fuel prices
When fuel prices rise, so does the demand for fuel-efficient vehicles, such as hybrid and fully electric cars. This increase in demand drives up new car prices.
-
Production
As demand increases for new cars, the production challenges this creates can further increase prices.
-
Eco-friendliness
The move towards electrification ahead of the 2030 ICE ban means that manufacturers have shifted their focus towards more eco-friendly models, such as EVs, which are more expensive to produce than traditional powertrain models.
When will new car prices drop?
Unfortunately, it is currently unclear when the price of new cars will fall. Sadly, these days, it is very difficult to buy a new car for under £10,000. If you’re working with a smaller budget, consider buying a used car – or selling your car to raise more cash towards your next purchase.
If you are wondering how much your car is currently worth, try our free car valuation tool. (Simply enter your reg number to get started.)
Is now a bad time to buy a new car?
Just as with used cars, new car prices are coming down slightly from their all-time peak in 2021-22. However, they are still significantly more expensive than they ever were pre-2020. Therefore, if you’re looking for a low-cost new motor, you’ll need to bide you time a little longer.