Used car price rises make small cars more expensive than ever

A year of rising used car values means that small car buyers are paying more than ever before.

Latest research by Parker's shows that the values of small cars have been on the increase since July 2008 and that the value of a three-year-old Citroen C1 has gone up by £830 in that time. A 1.0-litre Rhythm model that was worth £4020 in July 2008 is now worth £4850.

At the same time bigger, expensive cars are recovering to the prices of this time last year with 4x4s making the strongest recovery after seeing a steep drop value in the second half of 2008. Parker's reported in last July that some 4x4s were impossible to part exchange - that situation has now been reversed.

There are number of the reasons behind the increase in prices. Firstly is the strong demand for small cars as buyers look to downsize and reduce their running costs. While the values of most cars fell after last summer, demand for small cars were still strong and values have kept creeping up month on month.

Another reason for this is competition at auctions from dealers. As dealers attempt to replenish their used stock, which has fallen due to the lack of new car buyers and old cars as part exchange, they have had to visit auctions with the greater competition among them driving prices up.

This will be bad news for anyone looking to buy a small car. With some manufacturers putting the prices of new cars up three times in six months and the price of used cars rising, buyers will be paying more than ever for a small car.

However, this will be good news for anyone who is looking to sell their car privately or take it in as part exchange for a new car and means they will be getting more money for their car than they would have back in December.

These constant increases in prices appear to back up Parker's research that March was the best time to buy a car, whether new or used.

The increase in used values is not just being seen on small cars with big 4x4s recovering from big price drops in December. These took the biggest hit last summer thanks to high fuel prices.

The value of a three-year-old Discovery 2.7 TDV6 SE auto now as a part exchange would be about £19,500. If you had tried to part exchange the equivalent model back in December the price would have been £4000 less at just £15,000.

While some cars have returned to the values they were last year, many other models are still lower. These are slowly starting to recover to the prices they were last July after big drops in value at the end of 2008.

A three-year-old Mazda 6 2.0-litre d TS dropped in value more than £1000 between July and December last year with private values falling from £7285 to just £6095. This has started to pick up again with the recent rise and the private value for an equivalent model is around £6980.

It is still possible to make big savings on a car with supermarkets and brokers still offering deals, though buyers will have to work harder to find the best deals than earlier in the year as there are fewer around.