/ Money, Motoring

New car prices are being driven up

Our latest investigation into new car prices has found that some best-selling cars, like the Volkswagen Polo, have risen in real terms. Why are carmakers hiking new car prices above inflation?

On paper, all new cars are more expensive now than they were four years ago. It’s a given, with inflation, tax and VAT all increasing over that time period, along with changes in exchange rates.

So can we tell which makes and models are still good value, and which are delving deeper into our wallets?

Yes we can, as our latest investigation into new car prices has discovered.

We compared prices of 20 of the best-selling cars with their costs four years ago, stripping out external factors (those beyond the control of carmakers, such as tax).

We then teamed-up with car pricing firm CAP to identify the most similar models to compare across the 2008-2012 period, considering where they fit into the carmakers’ ranges.

Small cars, not such small prices

And it’s the more affordable, and most popular, end of the market where prices seem to have risen most.

The most substantial rise above inflation of all the models we scrutinised was the Volkswagen Polo. The price of the bestselling VW Polo has risen by £2,730 between 2008 and 2012. Even after removing the external factors, its prices have jumped 8.5% above inflation.

Medium hatchbacks also didn’t fare too well, with the Renault Mégane and Vauxhall Astra bestsellers coming out 8% and 7.5% above inflation, respectively.

It’s a different story with larger cars. In our analysis, the majority of best sellers in the large family car and MPV classes had actually seen their prices fall in real terms since 2008, and are now better value for money in 2012.

What’s behind the rises?

We spoke to some of the manufacturers to find out why their price changes were so inconsistent. They told us that new models with improved specs and better fuel economy, as well as changing exchange rates, all directly affected UK car prices. Volkswagen told us:

‘The latest Polo is of higher quality than its predecessor, it’s better equipped, and improved fuel economy lowers CO2 emissions and VED, saving owners money.’

That might be true, but a £840 rise in real terms is a high proportion of the overall price.

And then Vauxhall said:

‘We build cars in the UK, but source components from Europe and pay for them in euros. The exchange rate has declined substantially since 2009, impacting some of our list prices.’

But while the exchange rate did decline in late 2008, but other manufacturers seem to have better absorbed this currency risk.

Plus, none of this explained why some prices had compared more favourably against 2008 levels. Or why the cost of smaller, more ‘affordable’ cars seems to have risen faster during the recession. The price gap between a Ford Fiesta and Focus has narrowed, for example, as Fiesta prices seem to be ‘catching up’ with those of its bigger brother.

So are carmakers taking advantage of our desire to downsize? And do you think the rate of new car price rises is acceptable?

Comments
Profile photo of fred242
Member

The present Polo is about the size of the original Golf and has far more gadgets and features. At the same time it is built by robots, not people. Perhaps those looking at the Polo should be looking at the models that have appeared below it in the VW range and not be fooled by the tradition of model bloat from generation to generation.

Profile photo of Rob Hull
Member

The present Polo isn’t significantly bigger than the Polo available in 2008 we compared it to, though. In fact, the current Polo is only 5.4cm longer and 3.2cm wider than the previous generation Polo available in 2008. And both are significantly larger than the only model slotting below the Polo in the current VW range, the Up. So the Polo is still catering for the same size requirements as it has been for years.

Gadgets and tech are certainly going to improve as time continues, but this doesn’t explain why other manufacturers have managed to incorporate more technology and features into their models without having to put prices up as much. For example, the Ford Fiesta 1.25 Zetec petrol 5-door has only increased 0.5% above inflation in four years, despite a new model introduction during this period.

Looking at it this way, the Fiesta represents much better value for money over the four year period.

Profile photo of wavechange
Member

The tendency of manufacturers to add gadgetry will certainly add to the price. What prospective purchasers should be looking for is a full-size spare wheel and not a thin, small diameter space saver or no spare at all. This subject has generated a lot of concern on another Which? Conversation, with some people not knowing about what’s in the boot until they had a puncture.

The VAT increase may look small but it is a lot of money when buying even a small car, and we cannot blame manufacturers for this.

I am glad that the introduction mentions some cheaper cars because it annoys me when Which? focuses on expensive and/or uneconomical models. I would like to see cars achieve a minimum of 50 mpg to qualify for a place in the Which? Car Guide. That would save paper and save members’ money.

Profile photo of wavechange
Member

Oops – I had not read that allowance had been made for the VAT rise in calculating the price increases. That makes more sense.

I wonder if the price comparisons relate to the brochure prices or what people actually pay for their cars.

Profile photo of dean
Member

By making the original cars bigger, people who stick with their brand/model are being asked to pay more and more. The Focus for example is a massive car now, especially compared to the original Focus or even the Escort.

Then the manufacturer brings out a “new” model at the size that the higher model used to be whilst bringing down costs and using poorer quality components and plastics.

To me these days you are buying the brand name more than the quality/suitability of the car. In times of financial difficulty, companies looking to build their brands are actually making much more reliable/quality cars with much more comprehensive warranties. ie Kia, Hyundai etc etc.

I have a new mini, and I have to say that the build quality is awful, yes it handles well, goes like the clappers and looks great. But I have had so many problems since buying the “cherished” Mini that it has constantly been back at the dealer being fixed despite doing only 43000 miles.

Cheap parts, poorly designed, like most BMW’s these days, people just buy the badge. Had I known about the unreliability of the marque, I wouldn’t have bought one.

Member
David Hill says:
23 May 2012

Ref: Page 11 June edition.
Your researcher on the Toyota Prius should be fired without further consideration.
1. The 1.5VVTI Spirit was not diesel, but petrol. There never was a diesel Prius.
2. From 2009 Toyota changed from 1.5 to 1.8 and redesigned the T Spirit and up-rated many features.
3. It is not now possible to buy a new 1.5.
4.A most unprofessional contribution.

What are you going to do about it?

Profile photo of Rob Hull
Member

David, the description of the Toyota Prius in the June edition of Which? is incorrect, and should have read 1.5 VVTI T Spirit Petrol 5dr for the 2008 model and 1.8 VVTI T Spirit Petrol 5dr for the 2012 model. However, the pricing is still correct for the Prius, so the point still stands with this model. We’ll be printing a correction of the model description in the next issue.

Member
MartynA says:
1 June 2012

I can probably say what Rob would like to have said but can’t. “Thanks for pointing out the errors, we’ll put them right, but your tone stinks!”.

Member
Andi says:
25 May 2012

Price hikes has nothing to do with NEW cars it is about rising the price of 2nd cars

Profile photo of Chetz
Member

Here in the states, the government is mandating auto manufacturers to do a number of thing that are driving up the prices of cars. In 2016 rear view cameras will be manditory. Fuel mileage standards are rising also requiring a lot of R & D. One thing that really gets me is that there are a lot of technology items being put into new cars that, for me, are both unnecessary and useless. GM has their On-Star. My current car has (had) it. I never needed it or used it, but had to pay for it. Ford has their SYNC. I have no need or use for it. Touch screen controls for audio and in some cases climate control. They are becoming standard equipment in most vehicles. I don’t need or want these features. I don’t need to be constantly “connected”. All of these features are helping increase the price of new cars. I wish manufacturers would give the buyer a choice. I personally am not willing to pay for these unwanted (for me) features so it looks like I will no longer be in the new car market.