Autonet Insurance

Autonet Insurance

July 05, 2011 01:30 ET

Immediate Future Looks Bleak for New Car Sales Market

LONDON, UNITED KINGDOM--(Marketwire - July 5, 2011) - The cost of motoring hasn't strayed too far from media headlines recently, with petrol and insurance prices on the up; motoring has eventually become a heavy burden for UK drivers.

The new car sales market has especially taken a hit in recent months, following fears that the promising growth seen from the new car sales market could not be sustained as the SIS (Scrapage scheme) had come to an end. The SIS scheme which provided consumers with a discount of £2000 led to momentary improved growth resulting in almost one in five new cars sold through the scrapage scheme.

However, since the removal of the scrapage scheme, the most recent figures from the Society of Motoring Manufacturers and Traders (SMMT) illustrate a 7.4 per cent decline in new car sales from April 2011 compared to April 2010. This represented a drop of over 10,000 cars compared to last year to 137,746 and brings the decline in new car sales to nearly 700,000 cars, a drop of 8.5 per cent compared to 2010.

With further rises in petrol prices, the recent increase of VAT to 20% and Government's public spending cuts expected to impact on consumers' purchasing power, the immediate future for the new car sales market looks bleak.

Consumers turn to the second hand car sales market

The recession, which affected the economy in the second quarter of 2008 should have been an episode of growth for the used car sales market. With lenders enforcing stricter lending requirements, buyers were anticipated to turn to the used car market, but instead sales fell as second-hand cars were unable to compete on price against subsidised new cars on the SIS scheme. This year, however, since the Government bought an end to the scrappage scheme, sales have begun to increase.

Thanks to lower prices in the second hand car market, consumers realise that they are more likely to be able to achieve their plan of purchasing a second-hand car in comparison to those buying from the new sector. This has inevitably led to cash strapped consumers turning to the second hand market as they battle with the ever increasing costs of driving.

Ian Donaldson Managing Director of Autonet Insurance: "Buying a car is second to buying a house as the next most expensive thing that consumers will ever make. Unless dealers do something more to coax money conscious consumers into their showrooms, we would expect to see a steady decline in new car sales as consumers return to the used car market where lower prices are more attractive."

Autonet expects the used car market to benefit from this year's tough economic climate, with cheaper prices, and easy access to used cars; this should lead to an increase in used car sales.

Contact Information

  • Autonet Insurance Group
    Daniel Picken
    Burslem, Stoke-on-Trent, ST6 2BA