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WAGES RISE FASTER THAN CAR PRICES
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Old 04 Feb 2005, 09:39 PM   #1 (permalink)
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WAGES RISE FASTER THAN CAR PRICES

WHAT CAR? MAGAZINE


Embargo: 00.01, Monday February 7, 2005

WAGES RISE FASTER THAN CAR PRICES

New cars might be getting more expensive, but price rises are failing to keep up with inflation, according to the latest What Car? Price Index. Prices for new cars are up 0.1%, year on year, but with inflation running at 1.6%, this still represents good value.

Only in the small car class are prices outstripping inflation, with an annual rise of 3.1%. The good news is that average earnings have gone up by 4.4% over the same period.

The three prestige classes and small cars are the only sectors to have risen in price over the past year. All other classes have become cheaper.

City car prices have fallen by 2.6% and superminis are changing hands for 2.4% less than a year ago as dealers chase a decreasing number of buyers. Sales in both classes have fallen during the same 12 months – superminis by 3.9% and city cars by 7.1% – according to the Society of Motor Manufacturers and Traders.

Last month we signalled that the prices of MPVs were starting to soften. That trend has intensified and prices have fallen by 2.7% in the past month and 2.4% over the year.

Nearly new and used cars
Second-hand car prices have slid to an all-time low for the third month in a row, but the rate of decline has slowed slightly.

This month, nearly new car prices fell by 1.8%, compared to a drop of 2.5% last month. The average used car, meanwhile, has become 2.6% cheaper this month after a fall of 3.1% in the previous month.

“Over the year, nearly new cars have shed 7.5% of their value and used car prices are 7.4% lower. So, however you cut it, prices are in the bargain-basement and still tunneling,” said What Car? Editor, David Motton.

There is just one exception: used compact exec prices have risen 2.2% year on year. Don’t be too shocked, though. Values in this class were very soft a year ago, so that’s a 2.2% rise above an already weak price. Over the past month, prices have fallen by 1.7%.

Every other class is cheaper than a year ago. MPVs have fallen hardest, with nearly new examples 15.5% cheaper and used prices 11.2% lower, year on year. Supermini values are also on their knees: nearly new down 9.9%, used down 9.4%. Used 4x4s (down 12.2%), used family cars (down 9.4%) and nearly new city cars (down 9.3%) show that superb deals exist almost wherever you look.

The What Car? Price Index
Car price movements
Year-on-year comparison, December 2003 to December 2004
CATEGORY NEW CARS NEARLY NEW
(1 YEAR OLD) USED
(3 YEARS OLD)
CITY CARS -2.6% -9.3% -8.3%
SUPERMINIS -2.4% -9.9% -9.4%
SMALL CARS 3.1% -6.4% -7.0%
FAMILY CARS -0.2% -6.5% -9.4%
MPVs -2.4% -15.5% -11.2%
4x4 -0.4% -8.6% -12.2%
COMPACT EXECUTIVES 1.1% -1.6% 2.2%
EXECUTIVE CARS 1.1% -5.6% -4.5%
LUXURY CARS 1.0% -5.8% -3.2%
What Car? Price Index, year-on-year change: December 2004 0.1% -7.5% -7.4%

Notes to Editors:

What Car?
What Car? has been the car buyer’s champion for over 30 years. The What Car? stable now includes What Car?, What Car? Road Test Directory, and the What Car? Price Guide and Whatcar.com.

Index methodology
The prices of the consistently best-selling models within each of the eight categories of car are measured using “mystery shoppers” for new cars (to take into account discounts) and the What Car? Price Guide information for nearly new and used cars.

This information is combined into an Index for each category weighted by current sales volumes. Technically the Index is a chain-linked “Fisher Index” (geometric mean of Paasche and Laspeyres indices). This is the best way of making sure that the index is weighted according to the most up-to-date buying patterns. Due to the product life-cycle of cars and other factors, it is important to view the Index in the context of market conditions.

The Index gives indices for each category of cars, and as combined indices for new cars, nearly new (one year old) and used (three years old) cars and shows the level of the Index (June 1998=100), the month-on-month change and the year-on-year change.
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