Are UK new car sales dramatically on the decline?

A balloon can collapse in 2 ways… Either with a dramatically loud explosion, or slowly with a gradual release of air and a humerous noise.

Both ways however result in a flat balloon or whoopee cushion.

Why do I make this zen like analogy?

The SMMT has this morning released the latest car sales figures, and it is becoming increasingly clear to observers that the new car sales market is deflating …. rapidly.

Four straight months of decline clearly show new car sales peaked in 2016, a record year, and a severe decline is now in progress.

The evidence on any motorway journey is there are huge numbers of new cars out there.

Of the 35 million or so cars on the UK’s roads, probably a higher proportion than ever are less than three years old.

A sales boom in 2015 and 2016, fueled by cheap credit deals, was simply not sustainable, and has, as a by-product, severely damaged the used car market.

With increasing fears over the end residual values of these cheaply ‘bought’ cars, the prospects for car dealers, especially the larger groups, look comparatively bleak over the next few years.

Recently introduced scrappage schemes don’t seem to have (yet) halted the decline, for that is entirely what they were intended to do. They were never about saving the planet but were all about an increasingly cynical ploy to grab market share.

The initial schemes had some merit but those that came to the market later were often highly selective enhanced trade-in schemes.

Add into this mix the uncertainty over the future of diesel cars – it’s taken nearly 30 years for me to be able to say I told you so! – and there seems little chance of an upturn in the mainstream market until some of those 2 or 3 year PCPs come up for renewal.

The Bank of England has already expressed its concerns about cheap car loans and their effect.

A decade ago it was cheap loans on houses that got us all into a global meltdown… 10 years later will the effects of cheap car loans be just as bad? ….. Or is my glass just less than half full this morning??

Graham Benge

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