- cheap financing, PPI compensation claims and greater fuel efficiency drove UK car demand to pre-recession levels in May
Figures released today by the Society of Motor Manufacturers and Traders show that UK new car registrations grew 11% in May, with private demand increasing by 20.9%, outperforming pre-recession volumes recorded in 2007.
John Leech, UK head of automotive at KPMG, commented: “The UK new car market continues to significantly outperform European markets and the rest of the UK retail sector. Year-to-date the UK new car market is up 9.3%, driven by private buyers whose demand is up 16.2% year-to-date. This is against the backdrop of stagnant UK household incomes, forecast to rise by only 0.5% in 2013 by the Office for Budget Responsibility and continuing falls in new car sales throughout Europe, including the stronger economies such as Germany, which fell 9.9% in May 2013.
“I believe there are a number of factors behind this outperformance. Firstly, given the weakness in Eurozone markets, car manufacturers have turned their attention to the UK to keep their factories busy. The new car market in the UK continues to be buoyed by substantial discounts offered by car manufacturers directly to consumers, such as 0% finance. Analysts at CAP Automotive recently claimed that motorists are enjoying the best new car deals since 1979.
“Secondly UK Banks are midway through settling PPI misselling compensation claims with UK consumers which have averaged £2,700 per claimant over the past 2 years and totalled £9 billion so far. These one-off lump sums have released pent-up demand for cars.
“Finally, there have been some real advances in fuel efficiency offered by car manufacturers in response to a trend for consumers to favour smaller, fuel-efficient cars, which are up 14% year-to-date. At 7.5 years old, the average age of cars on the UK roads is now higher than at any time over the past 20 years and consumers are increasingly choosing to switch these older cars for newer, much more fuel-efficient vehicles.”
John continued: “These factors look likely to remain in place over the coming months, which is good news for car manufacturers, dealers and the consumer.”
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