The number of new cars registered in March this year reached record levels, as financially aware businesses and consumers made purchases before the new road tax rules came into play from the start of April. There were 562, 337 new car registrations in March, an 8.4% increase on the same month a year earlier.
Even though new car registrations in March have been increasing in number since 2011, this latest growth appears to have mainly been fuelled by changes to Vehicle Excise Duty (VED) rates. Below, we share our thoughts on these record findings and explain how they match up with our own findings.
New VED rates
Changes to VED rates only affect vehicles that are first registered with the DVLA from the 1st April 2017. After the changes, vehicle tax for the first year is based on CO² emissions, while for each of the following years it is a set rate dependant on the type of vehicle:
- Petrol/diesel: £140
- Alternative fuel (hybrid, bioethanol and LPG): £130
- Electric/vehicles with zero emissions: £0
The only exception is for vehicles with a list price of over £40,000. They must pay an additional rate of £310 a year, on top of the above rate, for five years after the first.
Increase in company demand
Fleet and business registrations were the two largest sectors where new car registrations grew. Fleet registrations were up by 12.6%, accounting for 261,930 units, while business registrations increased by 11.9% at 26,656 units. Private consumers also rose, by 4.4% to hit 273,751 cars.
This shows that companies were the main drive of an increase in new car registrations, which was noticed here at AA Cars. Simon Benson, Director of Motoring services at AA Cars, said: “Last month saw a flood of buyers rushing to beat the new vehicle excise duty charges that kicked in at the start of April, making March the biggest ever month for the UK’s new car market.
“Fleets – hit hardest by April’s tax changes – fuelled the sector’s growth last month as the biggest contributor to new car registrations, driving it up by a significant 12.6%.”
Further findings from AA Cars
It wasn’t just an increase in fleet registrations and company cars that we noticed led to such strong growth in March. Sales of electric and alternative fuel vehicles have been steadily growing in recent years too. As new cars that produce less than 100g/km of CO² will no longer benefit from zero VED rates, they saw a surge in sales in March too.
Used hybrid cars such as the Toyota Prius and many other models will have been bought before the new VED rates came in. This means they will still benefit from zero rate, as they produce less than 100g/km of CO², but if one is bought new under the newly introduced rates, drivers can expect to pay anywhere from £0 to £110 in the first year plus £130 for the next five.
Based on sales data at AA Cars, we found this was also the case. Simon Benson added: “Meanwhile sales of alternative fuel vehicles, including some models which as of this month will no longer benefit from a zero-rate fee, grew by almost a third (31%) last month. This reflects recent AA Cars research, which shows that purchasing intentions for electric and hybrid vehicles has doubled over the last two years.
“Of course, the repercussions of this rush could mean that the new car market will see a considerable slowdown in the coming months – which could prove to be a boon for used car dealers.”
Such record levels have been great for the used car industry in the past few months and it will be interesting to see how the number of new car registrations in April compare.
Image courtesy of iStock.