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New car sales in the UK fell sharply in August compared with the previous year, according to figures published on Tuesday by the Society of Motor Manufacturers and Traders. The number of new cars registered in the UK was 6.4 per cent lower in August than in the same month in 2016 — marking the fifth consecutive month of declines in new car sales. The number of new cars registered fell 9.3 per cent year on year in July. Mike Hawes, chief executive of SMMT, said on Tuesday that August was “typically a quiet month for the new car market as consumers and businesses delay purchases until the arrival of the new number plate in September”. He added that the trade association expected the “continuation of what are historically high levels of demand” later in the year. But some economists suggested demand for new cars in Britain may have peaked, and is now being held back by a combination of tighter financial conditions and uncertainty about the British economy. Howard Archer, chief economic adviser to the EY Item Club, said the drop in sales “indicates squeezed, uncertain consumers remain reluctant to make major purchases”.
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“Car sales may also be hampered by mounting pressure to restrict car finance deals and unsecured consumer credit,” he added. “The Bank of England has shown mounting concern over this and is keen for a more responsible approach to be adapted. This is magnified by concerns over the resale value of cars at the end of personal contract purchase deals.” Generous consumer financing deals have helped car purchases in the UK reach new highs. Despite the drop in sales on last year, this year was still the third-biggest for sales in August in 10 years. But consumer financing deals depend on a vibrant used car market to stay competitive — and economists are now concerned that a glut of cars may be depressing prices. Samuel Tombs, UK economist at Pantheon Macroeconomics, said the sharp fall in new car registrations shows why dealers have started launching scrappage schemes. Companies including Ford, Toyota and Volkswagen have all recently launched measures that give new car buyers money off if they trade in old vehicles. “Around half of cars on the road are more than eight years old, so in theory, these financial incentives could stem the downward trend in sales,” he said.
Source:-ft
