Three-year-old cars in most sectors have been trading for most of this year at lower prices than their exact equivalents a year before but the gap has reduced in recent months.

According to CAP, mainstream vehicle types have moved closer to last year’s prices, with a typical small family car now trading at only around 5% less than last December and a large family car just 4.1% lower. And two vehicle sectors actually have higher values than last year, including 4x4s which end the year worth almost 10% higher than in December 2009.

CAP's data also shows that the overall market has taken a step forward by standing just 4% lower than 12 months previously, compared with 6.6% in September.

And CAP says it believes that used car trade values will strengthen during the early part of 2011. Despite growing economic austerity and poor consumer confidence, low supply into the used car market will mean the possibility of demand still outstripping supply in the case of good quality used cars.

Mike Hind of CAP said: 'The New Year will be a good time to trade in a high quality used car. Our research shows that dealers are currently paying very strong prices to keep their stock levels up and that is unlikely to change any time soon.'