Sales dip as families pay off debts rather than buy new cars
Potential car buyers are more likely to pay off debt rather than shell out on a new 61-plate vehicle this month, spelling rough times ahead for the motor trade.
Research by AA Financial Services reveals potential purchasers are less likely to buy a new car and are instead choosing to hang on to their current motors for longer.
And in a double blow for dealers the survey says that even if they do buy another car, buyers will spend less than they would have done 12 months ago on it and pay for it using savings rather than lucrative in-showroom finance.
"The survey suggests that new car sales are likely to remain depressed," explained Mark Huggins, director of AA Financial Services. "Only a third of respondents plan to change their car within the next 24 months, less than a fifth of them intending to buy a brand new one.
"Seeing a shiny 61-plate car on the drive is a dream for most families when they have more pressing concerns, so they are hanging on to their cars a bit longer."
Huggins said that the research shows a third will only pay between £5,000 and £10,000 on their next car – if they do decide to buy – with more looking for under the £5k mark instead.
And he added the number of people who would consider taking out a loan to pay for a car has dropped from 20 per cent to just 11 per cent in the last two years.
However, despite the news the industry remains positive. Many manufacturers know times are still tough so good deals, low – and in some cases zero – interest rates are common and there are many new models to keep customers interested. Most car makers have pulled forward model launches to fight falling demand on forecourts.
Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders, told Autoblog: "September is an important month for the UK motor industry and motorists will find a lot to interest them at their local dealer. There are exciting new models with great fuel efficiency, affordable finance and no costly surprises with service plans.
"These are just some of the ways the industry is making sure buying a new car is fantastic value. Consumers are anxious about tax and increases in the cost of living, but those with money in the bank would be well advised to bag a bargain while they can."
Meanwhile, Paul Harrison, head of motor finance for the Finance and Leasing Association, questioned The AA's statistics.
"FLA members' share of the new car dealer finance market is at a two-year high of 57 per cent," he said. "There are many incentives available to consumers to buy new. That said, economic conditions have affected buying behaviour with more consumers turning to the used car market."
Daksh Gupta, chief executive of Marshall Motor Group – the 11th biggest dealer group in the UK – was also more optimistic, commenting: "Whilst we would agree many motorists are experiencing a period of prolonged economic challenge, our experience does not reflect the tone of the AA statement.
"The consumer offers from all of the vehicle manufacturers, including very attractive finance offers such as zero per cent, are helping lots of motorists to decide to change their cars. In many ways, new cars cost less to run than old cars."
Will you be looking to buy a new car soon? If not, why not? What's putting you off? Let us know by sharing your comments below.