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.
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?