The number of cars sold in Britain last month reached a 10 ten year high, as soaring levels of demand in the most rapidly growing market in Europe continues its upward trajectory, the Society of Motor Manufacturers and Traders (SMMT) has revealed.
The SMMT identified that there were 464,824 new car registrations in March this year, which represents a staggering 17.7% increase from the year before, and is the second largest figure recorded since the implementation of bi-annual car registrations back in 1999.
The SMMT also revealed that in the first three months of this year, car sales increased by 13.7% to 688,122, whilst demand for alternately fuelled motors rose by 63.8% in March compared to the year before.
It means that in the last two years, the UK has recorded 25 consecutive months of increasing car sale figures, despite the fact that the rest of the European market has stagnated, with European car sales reaching a twenty year low.
Mikes Hawes, the SMMT chief executive, said the statistics were ësurprisingly strongí, but reflected soaring consumer confidence levels in the market that have been incurred by long term access to cheap finance.
“Given the past six years of subdued economic performance across the UK, there is still a substantial margin of pent-up demand that is contributing to a strong new and used car market,” he added.
“We expect the market to continue to perform positively for the rest of the year, albeit at a more modest rate.”
Currently, around 75% of new car purchases made in the UK are paid for through finance schemes, which usually consist of the buyer being given access to credit to pay for their new vehicle, and then being given a fixed and specified number of months to pay the loan back.
The reality of this has raised fears that current booming levels of car sales will begin to fall dramatically when the Bank of England eventually begins to raise its base rate up from 0.5%, as consumer confidence begins to falls due to higher borrowing costs.
ìThe threat of rising interest rates may act as a brake on demand in the future,î said Phil Harrold, automotive partner at PwC, a consultancy.
ìHence my belief is that demand will return to more stable growth rates.î
The rise to prominence of personal contract purchases has been cited as the primary reason behind rising consumer confidence in the car market, with usage constantly on the up in Europeís top two car markets in Germany and England.
The schemes consist of the buyer paying off 50% of the carís price in monthly payments over a three year period, after which they can trade the car in and its residual price in return for a deposit on a new one.
Richard Lowe, Head of Retail and Wholesale at Barclays argued that whilst demand may fall in the long term due to higher interest rates that nevertheless the existence of these personal contract purchase schemes would mean that soaring levels of demand would likely remain for a few years yet.
ìUK consumers appear to be changing the way they buy new cars, opting to look beyond the price ticket on the windscreen in favour of affordable monthly payments,î said Mr Lowe.
ìWhile these tempting deals continue to be offered, demand is likely to continue to remain strong for some time.î
Data released by IHS Global Insight last month revealed that consumer confidence in Britain had risen to a 7 year high. They downplayed the impact that a rise inflation rates will have on demand in property market by highlighting that as wages begin to pick up and the gap between income growth and inflation begins to narrow, that consumer spending
power will rise organically.
Howard Archer, chief UK and European economist at IHS Global Insight, argued that the continual rise in car sales within the country was “extremely good news for the car industryî, and forecasted that the car industryís performance this year could have a significant impact on growth figures for the first three months of this year.
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