NEW data shows that Britain's used car market grew last year by 3.4% to 7.58 million units.

However, the figures, provided by the Driver and Vehicle Licensing Agency (DVLA) and analysed by automotive market intelligence company RL Polk, show a slowing rate of growth year-on-year at 3.4%, as used car sales were up 6.4% in 2001 compared to the year before.

The company believes one of the main reasons for this was strong demand for new cars, many of which were offered with incentives last year, diverting attention from used vehicles.

Nonetheless, it adds, the used car market grew slightly faster than the new car market last year – 3.4% against 2.9% respectively, according to DVLA figures.

The fact that younger cars are now more affordable, with rising average incomes and low interest rates the main reasons, is a factor in the slow-down in the used car market.

A spokesman added: 'Also, the fall in average used car values last year made more old and severely accident-damaged cars beyond economic repair.'

Nearly-new sales were also equal to 27% of the previous year's new car sales, showing that over a quarter of Britain's new car purchasers – including rental firms, dealers and manufacturers/importers themselves – dispose of new cars within a year of initial purchase.

The study shows that despite falling prices for old cars, the used market remains strong. The 2001 BCA Used Car Market report estimated the average retail value of used cars at £5,739.

Although used car values as a whole dropped during the year, the high proportion of nearly-new and other relatively young cars on the used market offset the marked decline of older cars' values, and 2002 average prices were probably little changed.

BCA's 2001 average price estimate, multiplied by 2002 used car sales volume, gives a total UK used car market value of over £43 billion.