THE average price of a three-year-old car has fallen in the first quarter of 2005, with further drops likely this year. This means the average car now costs £7,050, £175 less than at the same time last year.

According to the latest Glass’s Used Car Market Index, the average three-year-old vehicle in the UK (2002 ’51-plate with 36,000 miles) fell in value by 1.8%, or £125, over the past quarter.

Glass’s also reckons that modest year-on-year rises in rates of depreciation are likely to be apparent throughout much of 2005, with further drops throughout April as the effect of the March plate change becomes apparent and used buyers become more cautious with their money.

Alan Cole, editorial consultant for Glass’s Market Intelligence Service, said: ‘Retail demand for three-year-old cars during the first quarter was generally steady, although it continues to be heavily influenced by prevailing economic conditions.

‘With inflation under control, no increase in interest rates likely before next month’s General Election and a generally benign Budget, consumer buying confidence should be fairly sound, albeit weaker than last year. However, with house price rises likely to remain relatively subdued, sales of new and used cars in 2005 will not benefit from the levels of equity release experienced last year.’

Further subduing the market could be the General Election. Although business in the auction halls is reported as being active, experts fear that buyers could be put off until a new Government is voted in.