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MONEY COMMENT
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The latest Car Price Index from Alliance & Leicester (LSE: AL.) and What Car? magazine shows that the values of used cars have plunged over the last year. Even worse, A&L expects this trend to continue into the near future. According to A&L, the average value of nearly new (one-year-old) cars has fallen by 11.4% since June 2002; for three-year-old cars, the figure is 13.5%. This decline has worsened since May, when the year-on-year declines were 9% and 10.3% respectively. Overall, used-car prices have dived by 21% since June 2001. Prices have dropped in all categories, but Family Cars have suffered most, with nearly new cars down 13% and used cars down more than a fifth (21.9%) over the last year. What's more, new cars prices also fell in June, but by a mere 1.2%. The really bad news is that these falls come on top of the usual depreciation that causes a new car to lose up to 37% of its value in the first year and 57% over three years! As prices of new cars have fallen and sales have climbed, second-hand cars have flooded the market, causing a glut. Around 7 million used cars change hands every year, compared to 2.5 million new cars in 2002. A&L suggests that bargain hunters should take a close look at the second-hand market for cut-price deals, unless you have your heart set on a new car. If you do, make sure you haggle, as many dealers will offer discounts in order to shift existing stock. As a result, you may find some real bargains out there, especially if you're looking for a used vehicle in the Family Car category, such as a Ford Mondeo, Vauxhall Vectra or Peugeot 406. However, if you prefer to stick with your current car but would like to reduce your motoring costs, check out this article. Finally, if you're planning to raise a loan to buy a new or used car, take a minute or two to read this article on avoiding awful loans. It could save you thousands. More: Keeping Down The Cost Of Motoring | Choose Your Car With Care | Car-Buying Guide.