If you’ve got a second car which you’re not really using and you’re debating whether to sell it, now could be a great time to do so. The value of used cars increased in 2021 due to the holdups in new car supplies.
According to experts, values are not going to fall suddenly in 2022. “We’re seeing absolutely no evidence of that being the case,” says Richard Walker, Auto Trader’s director of data and insights.
“The new and used car supply constraints will last for much of the year, and with the economy set to grow, we can expect to see the very robust levels of consumer demand continue. Simple economics therefore point to a continuation of very strong price growth well into 2022.”
Its research found that the average price of a used car had grown by more than 30% from December 2020 to 2021. Also, for a third (33%) of people it asked in a survey, owning a car was more important for them now than it was pre-pandemic.
However, the flipside of this is that the value of any replacement car you buy will also have gone up. Then again, you won’t have a depreciating asset.
Will there be a best time to sell this year?
There used to be some seasonal price variations for selling certain types of car: convertibles went better in summer and four-wheel drives in winter, but these no longer really apply.
There’s been a noticeable increase in people treating themselves to the type or car they’ve always wanted with money saved, so demand for sports cars, prestige brands and SUVs is strong all-year round. In the event that your second car is electric and you’re wanting to sell, they are top of the most wanted list.
Cash in on a PCP
If your second car will be coming to the end of a personal contract purchase (PCP) agreement this year, you could be in a unique position because of the way these are structured.
Once you have completed all the regular monthly payments on a PCP, you choose whether or not to make the final balloon payment to own the car outright, or hand it back. Because current used car values are running significantly higher than what was expected three or four years ago when your balloon was set, there’s a good chance that your car may be worth more than the balloon payment.
Here’s an example. In October 2019 a typical PCP quote used by a car magazine for a BMW 118i Sport run over a three years and 36,000 mile contract came with an optional final balloon payment of £10,458.
In January 2022, however, the lowest value given in a price guide for the same car was still £16,175 in poor condition for private sale, £18,215 good condition. The part exchange value was £17,220
Even if used car prices fell by only a little this year, if in October 2022 you paid off the BMW’s balloon payment set in 2019, you could potentially make several thousand by selling the car straight on, or if you kept it, still make money some time ahead.
You’ll obviously need to check your own numbers and you’ll also need to check what requirements the finance company has for you to be able to sell the car while it’s still under finance, but it’s certainly worth investigating.
Sell and subscribe?
Once you’ve sold your second car (hopefully for a decent price), as an alternative to committing to buying or financing another second car right now, you could bank the capital and think about having a car subscription. Insurance, road tax and maintenance are usually included.
You can have an initial contract as low as six months, then rolling on a one-month basis when you can just hand the car back if you no longer need it or want a change.
If you’re thinking about an electric car as your second car, a subscription is a good way to try one out without having to commit. The Car Expert has four commercial partners offering subscriptions. Monthly costs can be as low as £239 for a small car. A number of manufacturers, such as Volvo and Hyundai, also offer subscriptions.
Scrappage schemes and incentives
You may have heard of scrappage schemes. These are incentives for people to trade in older more polluting cars (which then have to be scrapped) in return for a government grant or a discount off a new car by a manufacturer. The boom year for these was 2009 when car sales were sluggish.
There are no more government handouts, but a number of manufacturers were running scrappage schemes in 2021. There are fewer so far for 2022. As of early 2022, Kia was offering £1,750 off a new Picanto or Rio, or £2,250 off a Kia Stonic against cars seven years or more old. Lexus up to £4,000 for vehicles registered before 1 October 2012.
If you live in a UK city which already has a clean air zone, or is planning to have one, this may affect your decision to sell either your older diesel or petrol carl. You also may want to factor this in if you are moving home to a new city. We look at whether to keep or sell diesel here.
As they bring in clean air zones, some councils have also introduced incentives to scrap older petrol and diesel vehicles. It’s gone now, but in 2019 London offered £1,000 – £2,000 grants to scrap non-compliant cars and motorcycles.
However, right now, if you have a ten-year old car, it may still be better to sell it than go in for a scrappage scheme. The increase in used car values is across the board. According to Auto Trader’s data, the average price of a five to ten year-old car increased by 62% in 2021.
* The Car Expert has commercial partnerships with Auto Trader, Carwow, Cazoo, Elmo, Motorway, Mycardirect and Wagonex. If you click through to their websites, we may receive a small commission.