More people plan to buy a car this year than at any time over the past five years, according to AA Cars, the AA’s online used car platform. And of those, more than ever will use wither savings or ‘ready cash’ in their bank accounts. AA Cars believes this could be partly explained by the amount of PPI compensation paid to millions of consumers, many of whom are using the money to pay for cars.
- PPI compensation fuels car sales
- Quarter of motorists say they will change their car this year
- Five year high of people planning to buy a car
New research from the AA’s annual Car Purchase Index shows that more people plan to change their car this year than at any point in the past five years.
Suggesting that confidence is returning to the market, as 14-plate motors roll out of showrooms, more than a quarter (27%) of respondents to the AA/Populus panel study of over 21,000 AA members,* say they will change their car during 2014 – up 11% compared with last year.
Similarly, the number planning to change their car ‘within the next five years’ has also jumped to the highest for five years: 76% saying they will do so compared with the previous highest response, 65% in 2010.
And, while a fifth (21%) say they will buy a new car, more than three-quarters (77%) will buy a used car – suggesting that for every new ‘14’ plate car bought this March, more than three used cars will change hands.
David Bruce, director of AA Cars, says that the used car market expects 2014 to be a record year, encouraged by the fact that in January, new car sales were up 7.6% over the previous January.**
“This will be welcome news for the motor trade,” he says. “The signs are that 2014 could be a bumper year“.
What’s more, our research showed that people are most likely to buy their car using readily available money.
In fact, 40% say they will use savings which, given historically low savings interest rates, is perhaps not surprising.
But an unexptected finding is that a fifth (22%) say they will pay for a car using spare cash in their bank account – twice as many as in 2013 (11%).
I believe that this in part reflects the £13.3bn in Payment Protection Insurance (PPI) compensation claims paid out so far by banks and this is widely credited with helping to boost the UK economy. One recent report*** suggests that 22% of those receiving compensation are using the money to buy cars (22%), second only to those spending the money on holidays (24%).
As a result, car sales in the UK are striding ahead of the rest of Europe, where car sales have remained flat.
Findings from the AA Car Purchase Index
|Do you plan to buy a car in the next five years? (percentages)|
|Planning to change||76||48||53||56||65|
|Planning to change within a year||27||16||18||16||20|
|Of those buying a car: Will your next car be a..? (percentages)|
|Less than 3 years old||34||37||36||32||34|
|Over 3 years old||34||26||27||30||28|
Note: While respondents are overall slightly less likely to buy a new car than last year, they are much more likely to make their next purchase within the coming year, suggesting that a net increase in UK new car sales can be expected.
* Research carried out by Populus amongst 21,165 AA members aged 18+ on 11th to 17th October 2013. Populus is a member of the British Polling Council and abides by its rules.
** Source: SMMT