Motorists feel £2 billion sting as car prices soar

A ‘perfect storm’ of rising inflation and the car industry’s efforts to increase dealer profitability has cost UK car buyers nearly £2 billion in price hikes in just seven months, according to new research carried out by What Car?. However, great deals are still available if you know where to look.

While prices have risen by an average of 5.2% in the past seven months, the situation varies greatly from sector to sector; luxury cars are actually 0.2% cheaper than they were last June and executive saloons just 0.8% more expensive, whereas performance cars and MPVs now cost 8.4% more on average and large SUVs 12.3%.

These increases are thought to be partly a by-product of the Brexit vote, which immediately knocked the value of the pound and consequently the cost of importing both cars and the raw materials that go into their production.

However, they are also part of a longer-term trend which has seen manufacturers gradually reduce discounts and withdraw many of the most appealing 0% and low-rate interest finance deals as they seek to regain control of profit margins.

Vehicles costing less than £200 per month – the holy grail for many car buyers – now make up 9.9% of the market, compared with 13% seven months ago, with the same deposit in each case. But great deals can still be found in all sectors.

“We knew average prices were going up, but rather than a gradual rise, our research has shown that there has been a perfect storm of elements that has conspired to create a big bang in price hikes,” explained What Car? editor Steve Huntingford.

“Fortunately, the aggressive sales targets that many dealers have mean you can still get a great deal if you buy from the right place. It's why we recently launched an online new car buying marketplace, which saves the hassle of shopping around, letting you configure a car to your desired spec and then directly compare prices from dealers in your area.

“In addition, all deals are shown alongside a What Car? Target Price, which is the most our team of mystery shoppers think you should have to pay for a particular model. This makes it even easier for buyers to see whether a deal represents good value.”

Biggest discounts by segment

City car: Fiat Panda 1.2 Pop 26.8%

Small car: Seat Ibiza 1.0 SE Technology 3dr 24.7%

Family car: Citroën C4 24.0%

Executive car: Volvo S60 T4 190 SE Nav [Leather] 21.4%

Luxury car: Mercedes S-Class 350d L SE 19.2%

Estate car: BMW 5 Series 535d Luxury Touring 22.6%

MPV: Citroën C3 Picasso 30.0%

Small SUV: Renault Captur 0.9 TCE 90 Expression+ 11.8%

Large SUV: BMW X5 xDrive50i M Sport 12.7%

Coupé: BMW 6 Series 650i Sport Gran Coupe 22.1%

Convertible: BMW 6 Series 650i Sport Convertible 23.6%

Performance car: Mercedes CLS 63 S 18.6%

Lowest APR finance deals by segment

City car: Smart Fortwo Coupé 3yr 0% APR PCP with a £140 deposit

Small car: Mazda 2 3yr 0% APR PCP with a £750 deposit

Family car: Skoda Rapid Spaceback 3yr 0% APR PCP with an £1800 deposit

Executive car: Lexus IS 3yr 2.9% APR PCP with a £3000 deposit

Luxury car: Mercedes S-Class 3yr 0% APR PCP with a £8443 deposit

Estate car: Skoda Octavia Estate 3yr 0% APR PCP with a £2000 deposit

MPV: Ford S-Max Vignale 3yr 0.9% APR PCP with a £1000 deposit

Small SUV: Skoda Yeti SE and SE L 3yr 0% APR PCP with a £1500 deposit

Large SUV: Jeep Cherokee Limited 3yr 0% APR PCP with a £2750 deposit

Coupé: BMW 6 Series SE and M Sport Coupé 3yr 0% APR PCP with a £0 deposit

Convertible: BMW 6 Series SE and M Sport Convertible 3yr 0% APR PCP with a £0 deposit

Performance car: BMW M6 3yr 0% APR PCP with a £0 deposit

Read more – Which car finance option makes most sense?

Read more – Car tax changes in 2017, what you need to know

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