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UK car sales hit five-year high UK car sales at highest since onset of financial crisis
(about 1 hour later)
UK car sales soared to their highest level since 2007 last year, fuelled by growing consumer confidence, cheap finance deals and payouts from high street banks for PPI mis-selling. UK car sales soared to their highest level since 2007 last year, fuelled by growing consumer confidence, cheap finance deals and payouts over PPI mis-selling.
However, the sales glut brought a warning that second-hand car prices could slump within the next two years as the market is flooded with vehicles. The number of new cars sold jumped nearly 11% to 2.26m in 2013, the highest level since the onset of the financial crisis, according to the figures from the Society of Motor Manufacturers and Traders. It was equivalent to 600 more cars sold a day in 2013 compared with 2012, and bucked the trend across much of Europe where sales have been declining. UK sales rose by almost a quarter to 152,918 in December alone. However, the sales glut brought a warning that secondhand car prices could slump within the next two years as the market is flooded with vehicles. The number of new cars sold jumped nearly 11% to 2.26m in 2013, the highest level since the onset of the financial crisis, according to the figures from the Society of Motor Manufacturers and Traders (SMMT). It was equivalent to 600 more cars sold a day in 2013 compared with 2012, and bucked the trend across much of Europe where sales have been falling. UK sales rose by almost a quarter to 152,918 in December alone.
Mike Hawes, the SMMT's chief executive, said the car market had been "a bright spot" in the UK economy, helped by cheap finance deals which account for around three quarters of transactions. Mike Hawes, the SMMT's chief executive, said the car market had been "a bright spot" in the UK economy, helped by cheap finance deals which account for around three-quarters of transactions.
He added that while it was difficult to measure the precise impact of Payment Protection Insurance compensation on the car industry, average payouts of around £3,000 were also having an impact. "It's enough to put a deposit down on a car," he said. He said it was difficult to measure the precise impact of Payment Protection Insurance compensation on the car industry, but that average payouts of £3,000 were having an impact: "It's enough to put a deposit down on a car."
John Leech, head of automotive at consulting group KPMG, said that while cheap credit had been great for driving sales, it could store up problems for the used car market "a year or two from now". Leech said there was a danger of an oversupply of used cars building up as consumers opt to return their cars at the end of their three year personal car plan (PCP) deals. John Leech, head of automotive at consulting group KPMG, said that while cheap credit had been great for driving sales, it could store up problems for the used-car market "a year or two from now". Leech said there was a danger of an oversupply of used cars building up as consumers opt to return their cars at the end of their three-year personal car plan (PCP) deals.
"Car dealers now sell finance with the car where half the price is paid over 36 months and the remaining half is cleared by a bullet payment at the end of the 3 years. This has been great for new car sales as consumers choose to take a new car on another PCP rather than pay the bullet. The danger for car manufacturers and used car dealers is that the supply of three year old cars is starting to ramp up and, maybe in a year or two from now, will exceed demand leading to a potential residual value price crash and increased risk of loan default by consumers," he said. "Car dealers now sell finance with the car where half the price is paid over 36 months and the remaining half is cleared by a bullet payment at the end of the three years. This has been great for new car sales as consumers choose to take a new car on another PCP rather than pay the bullet. The danger for car manufacturers and used car dealers is that the supply of three-year-old cars is starting to ramp up and, maybe in a year or two from now, will exceed demand leading to a potential residual value price crash and an increased risk of loan default by consumers," he said.
The SMMT predicted a slowing of growth in new car sales to 1% in 2014, as the rebound in demand from the lows during the recession fades. A breakdown of the figures showed the strongest growth in 2013 was in sales to private buyers, which rose nearly 20% as consumers were feeling more confident against a backdrop of economic growth and falling unemployment and were encouraged by attractive promotions. The SMMT predicted a slowing of growth in new car sales to 1% in 2014, as the rebound in demand from the lows during the recession fades. A breakdown of the figures showed the strongest growth in 2013 due to private buyers, which rose nearly 20% as consumers felt more confident amid economic growth and falling unemployment and were encouraged by attractive promotions.
The Ford Fiesta was the best-selling new car in the UK last year, followed by the Ford Focus, Vauxhall Corsa, Vauxhall Astra and Volkswagen Golf.The Ford Fiesta was the best-selling new car in the UK last year, followed by the Ford Focus, Vauxhall Corsa, Vauxhall Astra and Volkswagen Golf.
The SMMT said British buying patterns were shifting towards smaller, more fuel efficient models, with "supermini" vehicles taking the largest market share of 35.9% in 2013. Registrations of hybrid and plug-in cars rose 20.5% to 32,715 vehicles. The SMMT said British buying patterns were shifting towards smaller, more fuel-efficient models, with "supermini" vehicles taking the largest market share of 35.9% in 2013. Registrations of hybrid and plug-in cars rose 20.5% to 32,715 vehicles.
Prime Minister David Cameron highlighted the 2013 sales figures on Twitter as an example of the growing UK economy. "5 key measures of manufacturing at all-time high & UK car sales top pre-2007 levels. See how we're growing UK economy," he tweeted. Prime Minister David Cameron tweeted that the 2013 figures were an example of the growing UK economy: "5 key measures of manufacturing at all-time high & UK car sales top pre-2007 levels. See how we're growing UK economy."
British demand has consistently outperformed the rest of Europe where car sales have been declining. Spain was the only other major market to register a growth in sales last year, with volumes up 2.1%, driven by the country's scrappage scheme. The German, French and Italian markets all shrank. UK demand has consistently outperformed the rest of Europe where car sales have been falling. Spain was the only other major market to register a growth in sales last year, with volumes up 2.1%, driven by a scrappage scheme. The German, French and Italian markets all shrank.
Howard Archer, chief UK economist at IHS Global Insight: "The motor industry will be hoping that the recent improvement in UK economic activity is sustained and extended, and that this underpins consumer and business confidence, and their willingness to splash out on new cars."Howard Archer, chief UK economist at IHS Global Insight: "The motor industry will be hoping that the recent improvement in UK economic activity is sustained and extended, and that this underpins consumer and business confidence, and their willingness to splash out on new cars."
Top ten cars 2013 Top 10 cars 2013
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1. Ford Fiesta 121,9291. Ford Fiesta 121,929
2. Ford Focus 87,3502. Ford Focus 87,350
3. Vauxhall Corsa 84,2753. Vauxhall Corsa 84,275
4. Vauxhall Astra 68,0704. Vauxhall Astra 68,070
5. Volkswagen Golf 64,9515. Volkswagen Golf 64,951
6. Nissan Qashqai 50,2116. Nissan Qashqai 50,211
7. BMW 3 Series 43,4947. BMW 3 Series 43,494
8. Volkswagen Polo 42,6098. Volkswagen Polo 42,609
9. BMW 1 Series 41,8839. BMW 1 Series 41,883
10. Peugeot 208 38,61610. Peugeot 208 38,616
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