After three years of the UK car market being a topsy-turvy place for anyone buying or selling a car, the last six months of 2023 have seen the world returning to a more normal state. Sort of…
From 2020 to 2022, the supply of new cars was heavily limited by the Covid pandemic and its aftermath – followed, of course, by the Russian invasion of Ukraine. This drove up prices by large chunks for both new and used cars, which was not helped by increasing inflation and interest rate rises. Cars have been very expensive for the last few years.
However, this situation has been improving in 2023. While it’s not completely back to normal in some sectors, the new car market is returning to its traditional operation of car manufacturers producing more cars than they really need to, then discounting them to make them attractive to customers.
Used car prices are steadily coming down from their record highs, with some areas falling faster than others. There’s been a lot of noise about used EV prices collapsing, but as usual that’s driven by anti-EV sections of the general media. Used EV values have been falling faster than used petrol/diesel car values, but that’s largely because they were much higher to start with. As more and more used EVs hit the market, inevitably supply matches or exceeds demand and prices fall. It’s what’s been happening for petrol and diesel cars forever, so there’s no great mystery (or conspiracy) here.
New car pricing for EVs has also been coming down – which addresses one of the principal concerns about electric cars – but that inevitably has a knock-on effect on used car values. Great for buyers looking to make the switch from petrol to electric, but not so good for anyone who thought EV values were going to remain unrealistically high forever.
So if you’re looking to buy a new or used car over the 2023/24 holiday period, the good news is that things are looking a lot better than they have been for the last few Christmases. Interest rates are still high, especially for used cars, but there are certainly a lot more deals to be had – especially if you want a petrol or diesel car. We explain why below.
Car dealers need to hit their targets
Sales staff are paid commissions and have targets to hit each month, quarter and year – and everyone needs to hit their annual targets. There’s a lot of frantic number-crunching going on right now, and plenty of dealerships and salespeople need to shift plenty of new and used cars by December 31.
The automotive retail industry runs on target-based economics. And as car manufacturers have been ramping up production, they’ve been leaning on their dealers to sell more and more cars. Dealers earn money or discounts from the manufacturers as a reward for hitting or exceeding those targets. This can be worth tens of thousands of pounds to a dealership, so it is in their interests to make sure they sell (and deliver) as many cars as possible before the calendar ticks over to January 1.
For everyone in the chain, failing to hit sales targets has serious financial consequences, so they are all ‘incentivised’ to hit those targets, usually by throwing money at customers in one way or another. Obviously the biggest incentives are going to be applied to the cars that the dealer can’t sell at full price, so there’s always a reason for any discount or freebies.
If you’re in the market and the car you’re interested in is available, you can take advantage of some great Christmas deals if you’re prepared to take delivery with full payment by the end of December. If it’s not registered by 31 December, it doesn’t count, so the offers won’t usually apply.
With pressure on struggling dealers to shift metal in the last couple of weeks of the year, salesmen’s bullshit levels will be going through the roof and business managers everywhere will be rehearsing their speeches about how GAP insurance can be included with hardly any impact on your low, low monthly payments…
New car Christmas bargains
For the manufacturers, new cars are what it’s all about. They’re far more interested in selling you a brand-new vehicle than one they built five years ago. So the biggest discounts and lowest interest rates will always be found on new cars – but not on every new car.
The best deals will always apply to models that haven’t been flying out the doors during the year or are due for replacement shortly, as manufacturers and dealers try to clear the decks for 2024 models to start rolling in. If you’re not hung up on getting a particular make and model, you may find that a rival brand is offering great deals on a similar sort of vehicle.
These deals usually revolve around deposit contributions and lower rates on their finance offers, and market analysis shows that both of these are far more lucrative than they were last year.
Conventional logic says that the best deals are always on vehicles available for delivery before 31 December, rather than forward orders that won’t arrive until January 2024 or later. Dealers have always prioritised taking your money now, rather than banking sales for the future, so they’d rather push you out the door in a car they have sitting on the showroom floor instead of ordering a car in for you that won’t arrive until later.
That’s still largely the case, but the ongoing shift from fossil fuels to electricity is making a mess of these conventions.
Petrol vs diesel vs hybrid vs electric – where are the best deals?
The market situation will vary from brand to brand, and often from dealer to dealer, but the general feeling is that the best deals are likely to be on petrol and diesel cars (and probably hybrids as well) this Christmas. While some companies will certainly have deals on electric cars, they may be fewer and less generous.
From next year, all car manufacturers have tough new government-mandated sales targets to hit for EVs, and several car companies will struggle to hit those targets, which means they face big fines from the government (as in £15K per vehicle). That means they may prefer to sell you a car in January 2024 rather than December 2023, so you may get a better deal if you are happy to take delivery early next year.
For petrol and diesel cars, it’s the reverse. It’s likely that deals for internal-combustion vehicles will be wound back next year as the focus shifts to EVs, so this may be your best chance in a long time to snap up a new petrol car at a great price. Diesels have largely disappeared from the new car market, but you could certainly get a great deal on any cars in stock and delivered before 31 December.
Used car Christmas bargains
Used car pricing has been steadily falling this year after two years of massively overinflated values. Pricing is still a bit higher than you’d expect, but the market is gradually correcting in favour of buyers. This is most noticeable in near-new cars, which have fallen in value more quickly. Older cars are holding up better so are still relatively expensive for their age and mileage.
However, steadily increasing interest rates for used car finance have largely wiped out falling prices, so your monthly payments will still be higher than for a similar age-and-mileage car from before Covid. Used car finance at dealerships is often not that competitive, so you should definitely get finance quotes from online lenders before you start your car hunting. If you’d like some suggestions, we’ve rounded up some of the UK’s best used car finance providers here:
As with new cars, dealers are looking to shift the stock they have on site before the end of the year, so you have to be ready to do business in order to get the best deals on offer. That means money all paid and/or finance all signed up and activated so that you are driving out in your car before 31 December.
If you have all your ducks lined up and are ready to buy, then you can save yourself some money on the advertised price, as well as maybe swing a better finance deal than is normally available. But choose your car carefully, as the market is still falling. If you don’t end up liking it very much, you could lose a lot of money if you want to sell it again in six months’ time…
Used EVs are generally quite a bit cheaper than they were last Christmas, largely because there are a lot more of them for sale. New EV sales have been growing rapidly since 2020, which means a lot more are now filtering through into the used car market. More supply always leads to falling prices, and falling new EV prices have also pushed down used EV prices, so it’s good news if you’re looking to buy a nearly-new used EV (up to three years old).
Pre-registered cars
Stock shortages on new cars meant that there were very few pre-registered cars hitting the market in December over the last couple of years. That has started to change, although it’s still nowhere near as prevalent as it was pre-pandemic.
A pre-registered car is one that is registered to the manufacturer or dealer, rather than to a customer, in order to count it as a ‘sale’ on the official records. Once registered, these cars will sit in a “secure storage facility” (which is usually just a field somewhere) for at least 90 days, after which time they can be sold as used cars.
In pre-pandemic times, pre-registered cars could make up as many as 25% of new car registrations for certain brands, which was a crazy situation. This situation almost completely disappeared from 2020 onwards, but is gradually starting to return as soon as car manufacturers have resumed pumping out more new vehicles over the last 12 months.
Out of season bargains
For years, conventional wisdom has said that the best time to buy a convertible is in winter, because demand is low since it’s freezing cold and raining/snowing/sleeting all the time. The reverse is supposedly true for 4WDs and SUVs, as demand is highest in winter when the roads are muddy and drivers get snowed in.
These ideas are still true to a certain extent, but nowhere near as much as they used to be.
Modern convertibles are perfectly comfortable with the roof up in winter, with few of the problems like leaking and terrible insulation that soft tops of yore used to have. Similarly, SUVs are popular all-year-round and are now the default type of car for a large number of households.
There will always be more demand for convertibles in warm weather because people are impulsive buyers, but canny sellers will realise this and make sure they have plenty of stock available to match the demand.
So you may be able to snap a better deal on a convertible over Christmas, but not by a massive amount. Likewise, the world is not going to run out of 4x4s over winter, despite what that desperate-looking salesman keeps suggesting.
How to save money on buying a car this Christmas
The potential savings on the car you are looking at could vary wildly, but automotive retail always comes down to supply and demand. This Christmas will be more favourable to buyers than dealers, but only on certain vehicles. For others, holding out until next year could be a better bet.
Make sure you know what sort of car you want, as specifically as possible. Many people get distracted by a deal that sounds great – and ignore the fact that the deal on offer is for a car that is not remotely suitable for their needs. Regardless of what the dealer says, be clear in your own mind about what you want.
Never roll up to a dealership without doing your homework. Check the top used car marketplaces for the going prices for the sort of car you’re looking for, and get a quote for your current car. One of the benefits of still-high used car pricing is that your current car may be worth more than you think. Online car buying services will often offer you considerably more for your car than a dealer will as a part-exchange, so make sure you’re getting as much money for it as you can.
Have a good read of our ten golden rules for buying a car. These are valid all-year-round but are key when there are potentially confusing offers being thrown at you from dealers.
Do your research online and make sure you understand what you are committing to. Have a read of our fantastic car finance glossary to be absolutely clear about all the jargon involved with that amazing offer the salesman was telling you about. While you’re at it, have a read of our checklist of what to organise before you apply for car finance.
Finally, and most importantly, know your financial limits. Whether you are paying cash or financing the vehicle, don’t be tempted to blow your budget just because it sounds like a good deal. And with prices being higher then normal, that may mean lowering your expectations a bit this time around.
Be a clever car buyer and you could save a bundle; if you are not so clever, it could cost you a lot more later on than you could ever save up front. Merry Christmas, and happy car shopping!
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This is one of our most popular articles and is thoroughly updated each year. Originally published in December 2014, it was most recently re-written and updated in December 2023 to reflect the current market situations for both new and used cars.
