Ford didn’t take the decision to raise its UK prices for the second time in two months lightly. According to Nigel Sharp, Ford of Britain’s MD, the alternative would be risking putting the company into ‘negative cashflow’ – losing money on the ex-factory price of each car sold.
But the announcement of an across-the-board price increase – which is likely to be copied by almost every other manufacturer – does come with one flash of silver lining. Because increasing the cost of new cars is also going to increase the value of used ones.
The collapse in new car sales is already having a direct effect on supplies of the sort of nearly-new vehicles that keep much of the motor trade turning. The scarcity of decent 08 and 58-plate metal has seen values strengthening, with the trade value of some superminis and Focus-sized hatches having gone up by more than five per cent since the beginning of the year. According to anecdotal trade evidence, the price guides are still lagging behind reality too, as dealers frantic for stock bid up the value of saleable ‘nearly-news’ at auction.
And increasing the price of new cars should also act to push up the value of similar used versions of popular models, even those that were originally sold for the pre-increase price. If scrappage incentives are introduced and, if as has been suggested, they can be used against the purchase of cars up to a year old, then demand for affordable nearly-new metal will increase even more.
None of this alters the fact that the British car market is still in a perilous state, but increasing used values should help to shield anyone with a strong part-ex against rising prices.