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Do used cars represent good value for money?Analysis shows that increases in values have outstripped the Consumer Price IndexBy Adrian Rushmoremanaging editor, Glass'sGiven that used car prices are always in a state of flux, it is useful to take the occasional snapshot of the current position relative to recent history, and to the cost of other popular goods and services. So, what is the value of a used car relative to the earlier years of this century? Most impor-tantly, what are retail buyers being expected to pay, and does this equate to good value for money?For the purposes of this exercise we are taking the Guide trade values for all three-year-old cars at December of each year from 2001 to 2011.Ignoring the 'bust' and 'boom' between 2008 and 2009, prices have generally been moving in an upward direction since 2005. Since the beginning of the period the average value has moved from just under £6,000 to £8,000, an increase of more than 33%. At first sight this appears to be surprisingly high. However, to put this into context it would be useful to compare this increase with the increases of a fixed basket all goods and services. The most common unit of measurement is the Consumer Price Index (CPI), and it is also the Government's inflation target. By setting the start point for inflation at the average used car value in 2001, it is possible to superimpose the annual increases on the original chart to produce the trend, as shown below.The immediate conclusion is that CPI lags behind the trend in used car values over the ast 11 years. If we had set the start point at 2005, this difference would be even more obvious. In other words, used car values currently look £0£1,000£2,000£3,000£4,000£5,000£6,000£7,000£8,000£9,000Dec 01Dec 02Dec 03Dec 04Dec 05Dec 06Dec 07Dec 08Dec 09Dec 10Dec 11 3 year allWhole market three-year-old residual trend£0£1,000£2,000£3,000£4,000£5,000£6,000£7,000£8,000£9,000Dec 01Dec 02Dec 03Dec 04Dec 05Dec 06Dec 07Dec 08Dec 09Dec 10Dec 113 yr allCPIWhole market 3yr-old residual values v CPIContinues overNew car marketNewsDealerprofileNew carnewsUsed carRecruitmentanalysisNewsdigestShowroomUsed car analysis

expensive compared to a wide basket of goods and services. However, as usual, data does not necessarily relay the complete story.Premium footholdIt is important to note that values represent the three-year vehicle parc at each year, but the composition of parc changes with time. Over the 11-year period, the premium brand manufacturers have established a greater foot­hold across the board and there has also been a greater penetration of diesels, and this is indicative for most manufacturers whether they are defined as premium or not. Not only does this change the mix of three-year-old supply but, more importantly, this mix is of an intrinsic greater value. This is because the current crop of three-year- old premium brand cars and diesels would have had a much higher original cost new than those cars that would have been purchased new 11 years earlier, i.e. non-premium brands and petrol models. Perhaps of more interest and relevance is to understand what has been happening in the near past. By comparison to previous years, the year-on-year changes from 2009 have shown steady increases (figures extracted from earlier chart and shown below).Before we draw any conclusions it is also impor­tant to understand if the parc of three-year-old cars has changed significantly. This can be done by looking at the change in list prices of these three-year-old cars when they were new, and by looking at the types of car that were represented in each of these years.What the above list price analysis shows is that the composition of the car parc over the period, measured by their prices when new, only increased by 2.7% and 1.3% respectively. Further­more, for each of the three years, residual values, measured as a percentage of the original list price, remained constant at 44%. The types of three-year-old car available to the market did not change significantly, although the content of lifestyle 4x4s and city cars was slightly greater, there were slightly fewer upper medium family cars present, and the premium brands continued their relentless progress.What we conclude is that if the three-year-old Dec 09 Dec 10 Dec 11Values for 3 yr old - whole market £7,775 £7,825 £8,000% increase 0.6% 2.2% £ increase £50 £175Changes in residual values from 2009Used car analysiscontinues Dec 09 Dec 10 Dec 11Values for 3-yr-old - whole market £7,775 £7,825 £8,000Original list price for 3-y- old £17,475 £19,950 £18,175% increase 2.7% 1.3%% residual value 44% 44% 44%Changes in list prices for three -year-old cars