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Future looks bleak for car sales market

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As the cost of motoring continues to soar, with petrol and insurance prices on the up; motoring has become a heavy financial burden for UK drivers.

New car sales have especially taken a hit in recent months.  The SIS scheme, which provided consumers with a discount of £2000, led to an upturn in the new cars sales market, with one in five cars being sold as new as a result of 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% 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, bringing the figure down to 137,746.

This means the decline in new car sales today stands at nearly 700,000 cars, a drop of 8.5 per cent compared to 2010.

With Government’s public spending cuts expected to impact on consumers’ purchasing power, and the increase in price of petrol and car insurance, the immediate future for the new car sales market looks bleak.

Consumers turning to second hand cars

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. However, since the Government bought an end to the Scrapage scheme, sales have begun to steadily increase for used cars.

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 most expensive purchase 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.


By Ben Malkin and Daniel Picken

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