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30 August 2011
Car buyers likely to hang on to their cars for longer
With car registrations having declined for 13 consecutive months according to SMMT figures, car retailers will be hoping that the new '61 plate' (new registrations from September 2011) might bring a reversal in fortunes.
But according to research from AA Financial Services, car buyers are hanging on to their motors for longer, are likely to spend less if they do buy another car and are most likely to use their savings to pay for it, rather than take out a loan or car dealer finance. This comes at a time when household savings, income and spendable cash are at all-time lows.
It will take a long time before car sales are back to their pre-2010 levels. Low interest rates mean that many people are paying off debts with their savings and are putting off expensive purchases such as cars.
However, this does mean that there will be some bargains to be had on the forecourt for those prepared to haggle.
The AA's Car Purchase Index suggested that new car sales are likely to remain depressed. Only a third plan to change their car within the next 24 month with less than a fifth of them (19%) intending to buy a brand new car
Mark Huggins, director of AA Financial Services
Mark Huggins, director of AA Financial Services, says: "The AA's Car Purchase Index suggested that new car sales are likely to remain depressed. Only a third plan to change their car within the next 24 month with less than a fifth of them (19%) intending to buy a brand new car.
"What's more, people are spending less – this year, 29% were thinking of paying between £5,000 and £10,000, compared with 32% last year. The number of people expecting to spend less than £5,000 has increased from 23% to 26%."
"Seeing a shiny new 61-plate car on the drive is a dream for most families when they have more pressing concerns, so they are hanging on to their cars a bit longer."
This is largely explained by lack of financial confidence marked by a big drop in the number of people prepared to consider taking out a loan to pay for a car - from a fifth (20%) two years ago to just 11% now.
People are most likely to use their savings (39%) or find ready cash from elsewhere, such as investments or pension lump-sums if they do decide to buy a car.
According to the SMMT, car sales in the UK fell 3.5% in July to 131,634 new vehicles registered, the 13th consecutive monthly fall.
AA/Populus received 18,251 responses to the Car Purchase Index questionnaire in January 2011. The research is carried out annually.
(1 September 2011)