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UK Car Sales in decline in 2017
As you may or may not be aware, the new car sales market is in decline and has been for the previous six months compared to the same period of last year. Several factors contribute to the decrease in sales, such as the increase in PCP sales and the decline in popularity for diesel models.
It is a fall in sales predicted by most market analysts, mainly due to the rapid increase in sales over the last five years. The market is very cyclical, and people tend to swap and change their cars over a three-year term. Therefore, the decrease in sales was expected to the degree it has.
The Brexit effect
Another major factor this year is, of course, Brexit. According to the SMMT, Society of Motor Manufacturers and Traders, consumer confidence has fallen, and it has been attributed to a drop in the property market and new car sales. However, there isn't a direct causality between Brexit and new car sales, but many believe it has impacted both. There are also other factors - such as increasing PCP sales.
The increase in the popularity of the Personal Contract Purchase (PCP) has had a considerable effect on the market as it delays the need to replace the vehicle until possible. More and more people are choosing this as the preferred payment method due to the low monthly payments and the incentive to swap the car at the end of paying a lump sum (Balloon Payment) to keep the vehicle.
Other factors have also contributed, such as increased interest rates and rising inflation, resulting in reduced disposable income and therefore less money swapping and changing cars. That said, it is only a slight decrease, and the total number of sales is still more than the whole of 2012 with two months of sales left to go. Based on predicted figures, we expect the total number of new car registrations to be more than 2013 but just short of 2014. The predicted total number of new car sales is just less than 2.5 million, with 2015 and 2016 surpassing the 2.5 million mark.
The first quarter of the year looked promising as sales increased by 0.7% in the used car market. However, the increase didn't last long as both the 2nd and 3rd quarters indicated a substantial decline mirroring the new car trend.
Diesel car sales slump
The decline in the sale of diesel models has also had a significant impact on the market. After the Volkswagen emission scandal in 2015, there have been some things that the Government has changed, and campaigns against diesel models over the air quality have also influenced sales figures. The new registration month of September usually provides an increase in sales. However, for diesel models this year, there has been a massive drop of 20% in sales compared to September the previous year.
The decline in car sales is mainly due to a natural decrease in demand and the impact of Brexit on consumer confidence. However, other factors such as the increase in PCP sales and the decline in diesel models also contribute. The market is very cyclical, so it's not surprising that there has been a decrease in sales over the past few months. Although things don't look good for the current year, we can expect things to pick up again in the near future.