Calculations by Auto Express show that the price of a new petrol car has risen at more than 20 times the rate of inflation.
The car magazine worked out that if a new petrol car had risen at the rate of CPI inflation (an average of 3.3% per year) it would cost £36,225 now – almost £9,000 less.
It’s not just petrol cars that have gone up in price. The average retail price of hybrids has also risen, from £30,485 to £44,274 (up 45%) in 10 years. Again, if they had risen with inflation, the increase in cost would be £10,320, rather than almost £14,000.
The average RRP of diesel cars has increased too, but it’s exaggerated by a structural shift; many mainstream car makers have stopped selling diesels as demand has plummeted, leaving the field to premium German car makers.
Have much have car prices risen by?
Auto Express crunched the numbers on a petrol-powered Ford Puma, Volkswagen Golf, Dacia Duster and diesel Mercedes E-class, taking one popular variant on consistent sale from 2014 to 2024 (sales data is every two years).
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The Dacia posted the highest percentage increase (33%), but its low list price contained the monetary hike to £4,697. Mercedes posted the biggest wallet impact – up £11,951 (26%) – while Volkswagen boosted the Golf by £5,994 and Ford upped the price of a Puma to £3,074 (12%).
What’s behind the price hikes?
Phil MacNamara, editor at large at Auto Express, said: “There is no one factor pushing these price hikes; regulation, rising raw material costs, supply chain issues, changing consumer tastes and manufacturer line-ups – plus the Covid-19 pandemic – all play a part.”
The Covid pandemic had a massive impact on the car industry. Lockdowns and furloughs hit the global supply chain, causing components to become scarcer and raw material prices to rise. These were ratcheted up further when Russia invaded Ukraine, triggering an energy price shock.
MacNamara said: “Covid-19 interrupted the status quo of Europe’s car factories churning out more cars than there were customers, which had constrained transaction prices. Semiconductors became headline news, with a ‘chips crisis’ meaning manufacturers could only build a finite number of cars, so they focused on expensive, higher-margin models such as SUVs, and EVs to help meet emissions targets.
“Suddenly you couldn’t get city cars or superminis. It was SUVs because that’s where the profit was: you can imagine the profit in a [£50,000-80,000] SUV is tenfold what it is in your £15-grand supermini.
“With new car demand exceeding supply, the mindset of Europe’s car makers changed: to focus on delivering ‘value not volume’, in the mantra of Renault, Mercedes-Benz and Ford. Not necessarily value to the customer – but to their bottom line and to shareholders.”
Bigger cars
One reason behind the price increase is the weight increase in cars. Patrice Lévy-Bencheton, Dacia’s vice president of product performance, told Auto Express that since 2000, European cars have increased in weight by an average of 21%, triggering a 56% increase in engine power, with upgraded mechanicals adding cost.
There are two main factors at play here: bigger crumple zones to meet crash regulations and consumers abandoning low-slung cars for SUVs.
Low EV sales
Lawmakers have introduced targets to reduce vehicle carbon dioxide emissions. The UK’s ZEV mandate sets rising quotas for electric vehicle (EV) sales, while the European Commission stipulates car making groups should not exceed an average of 93.6g/km across their total car sales (lowering to 49.5g/km from 2030.
This means that for manufacturers to achieve the 2025 European target, EVs have to make up 22% of sales. However, last year the European industry was around 14%, as Governments rolled back electric subsidies.
Safety standards
The EU’s ‘General Safety Regulation’ (GSR) has driven up costs by mandating advanced driver assistance systems since July 2022.
In 2024, GSR2 expanded the requirement to all cars on sale, forcing manufacturers to decide whether retrofitting was viable.
From November 2027, Euro 7 emissions rules will further increase costs, with tighter nitrogen oxide limits and stricter particle controls for all cars. Some estimates suggest this will add €2,000 (£1,650) to new car prices.
MacNamara said: “Everyone wants safer and cleaner cars. The challenge is who pays the price of progress. It all adds up to a perfect storm of inflationary factors, stoking the price of every new car.”
