What happened to cheap and cheerful cars?

New car prices are ballooning and the days of sub-£10,000 models are long gone. Even budget stalwarts, such as the Vauxhall Corsa that cost £6,500 in 2006, now cost nearly three times what they did back then (and well above inflation).

Meanwhile, the VW Golf went from less than £12,000 at the turn of the century to £27,000 today – again, well above the £22,500 you’d expect if its price was strapped to inflation.

So what’s driving the price of new cars? The explanation is a mix that includes the costs that have affected everything in life for the past few years, technological advancements, regulations and the somewhat awkward transition to EVs.

Cheap, but not cheerful

Take the iconic Ford Fiesta, which is a perfect analogue for the seismic changes in the car industry. It might have been the bestselling car in the UK for 12 years running from 2009 to 2020, but that wasn’t enough to save it. With 22m sold, the Fiesta’s 47-year production run ended in 2023. Ford said the Fiesta’s discontinuation was due to the factory that built it being repurposed for the much larger, and electric, Ford Explorer SUV.

Higher margins and a regulatory-induced push toward electrification meant that, for Ford at least, ditching famous but low-margin models made commercial sense. There have been unconfirmed reports that Ford is set to relaunch the Fiesta as an EV in 2028.

Based on our tests, the cheapest new cars these days have big compromises. They include the £12,500 electric Dacia Spring (uncomfortable seats and noisy at speed), the £14,200 Leapmotor T03 (annoying tech) and the £16,100 Kia Picanto (loud and slow). There are plenty of cheap petrol Dacias around, including the Dacia Sandero, but poor Euro NCAP scores (more on this later) and uncomfortable seats make them hard to recommend.

Push past £17,000 and you’ll find some decent cars, including the electric BYD Dolphin Surf, Renault Clio, Seat Ibiza and Vauxhall Corsa. The cheapest car to get our Great Value recommendation is the Skoda Fabia, which can be had for £18,200. In context, these are reasonable prices, but they still represent a massive increase versus inflation.

Feature creep

Thanks to the ready availability of low-interest car finance (see p15), it’s easier than ever to get the car you want – even if the cash price is eye-wateringly high. What’s more, finance deals make it easier for manufacturers to bundle multiple features into a single package of upgrades.

For example, Mini’s cheapest two-door petrol Cooper starts at around £25,000. But the only way to get heated front seats is to opt for the £2,000 Level 1 upgrade, which comprises seven other features, including electric door mirrors, a head-up display and a wireless phone charger. It’s £4,000 for Level 2, even if you just wanted the tinted windows. Perhaps easier to stomach is the £50 to £100-per-month increase in personal contract purchase (PCP) costs.

This might be annoying for customers, but Pat Hoy, a car pricing analyst and founder of buying advice service Insider Car Deals, told us that these packs are essential for dealers. ‘If you give people too much choice, you increase friction to the point where people say “let me go away and think about it", which is a killer for dealers.’

And with high-spec used cars back on the market again, it drives up the prices of used vehicles: every used car was once new, and the choices the original owner made will be reflected in its sale price for years.

The safety debate

Some, including a few manufacturers, argue that modern safety tech is also to blame. There is some truth to this; the safety kit required on new cars by law is extensive. Extra, but not mandatory, safety features that help secure a five-star rating from car safety body Euro NCAP are also now found on many new vehicles.

There’s also been a shift from passive safety (airbags, seatbelts) toward active safety systems. The latter includes speed-sign recognition, emergency lane-keep assist, driver-distraction monitoring and automatic emergency braking – all of which have been mandatory for cars sold in Europe since 2024. Collectively, features such as this are known as advanced driver assistance systems (ADAS).

ADAS requires sensors or cameras (often both), which is an extra cost both in the added materials, and for manufacturers to set up and tune the tech for their cars.

Euro NCAP ratings – which aren’t statutory, but are important for many buyers – cop some blame. The safety body has always fought this, telling us it benchmarks what it takes to achieve a high score with what’s possible with ‘modestly priced’ systems.

Its secretary general, Dr Michiel van Ratingen, says: ‘It’s also important to highlight the impact Euro NCAP has on the market – component prices, such as for radar systems or a camera, rapidly reduce as volumes increase,’ citing the example of a specific radar unit dropping from ‘hundreds of dollars’ in the mid-2010s to as little as $38 (£28) in 2024.

For some manufacturers, this is actually a point of difference. Yousif Al-Ani, principal ADAS engineer at car insurance risk firm Thatcham Research, cites the example of new-to-the-UK manufacturers that include semi-autonomous driving features (such as automatic steering while on motorways) on cars that are much cheaper than rivals from more established brands in the UK.

But, according to Al-Ani, those traditional manufacturers almost always put more effort into tuning and calibration. ‘So even if you get a car from them that has that minimum amount of mandatory ADAS kit, it will tend to be a bit better than on cheaper cars where they have just put stuff in off the shelf,’ says Al-Ani. While the quality of ADAS still leaves a lot of room for improvement, we’ve generally found in our own lab tests that ADAS from the bigger brands is better than on those new to the UK.

We also know that many people don’t want this tech. According to our research, around half of drivers with an ADAS system on their car regularly turn it off.

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Economic shocks

The Covid pandemic had a huge impact on prices in 2021-22. Pent-up demand from people who didn’t buy a car in 2020, plus the impact of a Covid-induced computer chip shortage, caused prices to rise enormously in a short space of time. Autotrader’s retail price index shows that the average sale price of new and used cars rose from £13,622 in February 2020 to a peak of £18,067 in January 2022.

Post-Covid, the rise in energy costs and supply chain disruption fuelled by the invasion of Ukraine were a one-two punch that kept prices rising further.

Another slightly counterintuitive factor in the decline of cheap and cheerful petrol and diesel cars is the continued push for electrification. With manufacturers in the UK now facing hefty fines for selling too many petrol and diesel cars versus EVs (known as the Zero Emissions Vehicle mandate, or ZEV), there’s less motivation for those manufacturers to sell these cars if all they’re going to do is contribute to fines come year’s end.

Demand for EVs is still well below the government’s own targets, which then leaves manufacturers in a tricky situation: sell fewer fossil fuel cars or pay huge fines. In 2024, Carlos Tavares, then chief executive of Stellantis – the company that owns Peugeot, Vauxhall and other brands – said that the policy was ‘terrible’ and threatened to (and ultimately did) close a factory in the UK.

Another option was to restrict the supply of fine-attracting cars. Ford’s former EV boss, Martin Sander, said: ‘We can’t push EVs into the market against demand. We’re not going to pay penalties. We’re not going to sell EVs at huge losses just to buy compliance. The only alternative is to take our shipments of [petrol and diesel] cars to the UK down and sell these vehicles somewhere else.’ As with safety tech, it’s hard to put an exact number to these claims, but again the vociferousness of the industry suggests the impact is, at the very least, not zero.

Tech advancements required for the upcoming Euro 7 emissions rules on petrol and diesel cars are also a factor in the rising price of these vehicles. The European Commission puts the per-car cost at up to £130, while the European Automobile Manufacturers’ Association (a lobbying group) puts it at £1,700.

Should I buy an electric car? All the questions you need to ask yourself before making the switch

Increased competition

In some ways, the future could be bright. Marc Palmer, head of strategy and insights at car marketplace Autotrader, points out that there are now around 80 individual car brands available in the UK, up from 45 in 2019, and savvy consumers don’t have much car brand loyalty.

In our survey of 1,029 members of the Which? Connect panel in February 2026, 31% of respondents said they’d consider a car brand they had never heard of if it could save them £10,000 on their next car (44% said they wouldn’t). ‘There aren’t suddenly loads more people buying new cars, so there is now fierce competition for those buyers,’ Palmer explained. This might ease the pain for used-car buyers, too: ‘When those cars come back into the used market over the next two or three years, they will represent very good value for money, just in the same way that they did when they were new.’

So far, it seems that it’s predominantly fresh-to-the-UK Chinese brands that are very much doing their own thing with tech-heavy cars at cut-down prices. But, according to Insider Car Deals’ Pat Hoy, this is likely only temporary as the brands establish themselves.

What’s more, the hardware required to power artificial intelligence (AI) has sent the price of computer components soaring, even those not being used on AI products, such as cars. Buyers will likely be shielded from this for now, since car manufacturers tend to bulk-buy components a long way into the future, but this can only last so long. While this might not cause a Covid-style increase in prices, with so much tech in modern vehicles, it wouldn’t be unwise to consider buying your next new car sooner rather than later.

Ultimately, there will always be cars that are cheaper and more cheerful than their contemporaries. But with ever-advancing technology and manufacturers continually hungry for margins in an era of deep uncertainty about the next generation of EVs, it’s never been more important to be savvy at the dealership.

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