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5 March 2012
As the first shiny '12' plate cars roll out of showrooms this March, car dealers can expect to see improved sales compared with this time last year as buyers raid their savings to buy them, according to the latest Car Purchase Index for AA Financial Services.
Nearly a fifth (18%) of respondents in the AA/Populus study will buy a car over the coming year, up 2% from last year. Buyers are most likely to use their savings, ready cash or investments to fund their next car – 44% say they will use their savings, 5% more than last year and an 8% increase from three years ago.
The AA's study also shows that the number of buyers who will finance their car with a personal loan (13%), has increased slightly over last year's 11% low. But it is still considerably less than the fifth (20%) of those who planned to borrow for a car in 2009.
... the study gives grounds for optimism that the car market is slowly recovering
Mark Huggins, director of AA Financial Services
Mark Huggins, director of AA Financial Services, says that the study of over 16,500 AA members* gives grounds for optimism that the car market is slowly recovering. "Interest in buying cars appears to be reawakening since the successful scrappage scheme ended two years ago; and since the VAT increase of last year added around £500 to the typical price tag of a new car," he says.
"Continuing low interest rates and people nervous about building up too much personal debt means that using savings, or other ready cash is still by far the favoured way of buying. But recent small interest rate falls from many lenders, including the AA, is leading more people to think about taking out a car loan."
Despite the cost of diesel fuel reaching record levels,** diesel powered cars are still the nation's favourite – 48% of those planning to buy a car saying this is what they will choose compared with 44% going for petrol. Diesel became the favourite fuel for the first time last year. Hybrid cars still attract around 3% of buyers, and have done since 2009.
"New car technology is still being treated with caution," Mr Huggins says. "But a new question in the study showed that nearly a third (31%) say they are attracted to the concept of hybrid or electric cars, provided the cost falls and technology improves.
"In fact, 11 buyers say they'll buy an electric car this year. While that's hardly a rush, it's 10 more than last year!
"The idea of cheap-to-run cars has high appeal," he suggests. "'Low running costs' (39%) is second only to 'present car too old' (45%) as the main considerations for changing a car, which augurs well for emerging car technologies."
AA Financial Services offers a range of savings plans including fixed rate savings bonds (an ideal way to save for a car); ISAs and internet accounts. In addition, it offers car loans while the AA Reward Credit Card offers generous rewards on fuel purchases.