New research from Auto Trader reveals that new car prices have risen by a staggering 43 per cent since 2018.
At the start of 2018, the average price of a new car was £27,305. Fast forward five years and the average sticker price for a new car is a whopping £39,038.
New car prices have continued to rise over the years, peaking at a 12% increase in early 2020 and 9% in early 2023.
Auto Trader experts say some of the growth can be attributed to a change in preferences among new car buyers in the UK – namely a shift from regular hatchbacks to SUVs.
Back in 2018, hatchbacks accounted for almost a third of new car sales, making them the most popular new car type.
However, by 2023, SUVs are by far the most popular body type – accounting for more than 40% of new vehicle sales.
Fewer than one in five new car buyers now prefer hatchbacks.
However, the biggest impact on the price increase of new cars is electric car.
Over the past five years, more expensive electric vehicles have increased their share of all new car sales from 1 percent to 12 percent, while hybrids have increased from 2 percent to 14 percent.
In contrast, new diesels shrank from 46% of the new car market to just 17%.
Combined with a marked rise in inflation leading to higher borrowing costs, Brits are spending more on new cars each month.
As the Bank of England base rate rose from 0.5% to 4.0%, the PCP funding rate also rose.
Auto Trader research shows that the average annual interest rate on a new car powered by a financial calculator has risen from 5.1% in January 2022 to 8.1% at the start of this year.
Add in the new and used car markets, at least, and used car prices aren’t far behind: They’ve risen for 35 straight months.
The average price of a used car has risen by around £4,000 since the start of the pandemic.
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