Car Sales – Good News, Bad News

Despite widespread fears that the UK is entering an economic recession, there are grounds for cautious optimism about sales of new and used cars in 2009. According to EurotaxGlass’s, publisher of Glass’s Guide, the used car market is likely to be the first to recover from today’s lows, followed by a steady – albeit modest – upturn in retail sales of new cars. However, fleet registrations are expected to remain lacklustre, at least until late next year.

“In the short term, conditions will remain difficult for car dealers, reinforced by the usual seasonal decline in demand that accompanies the latter months of the year,” explains Adrian Rushmore, Managing Editor at EurotaxGlass’s. ” However, we believe the swift and painful downturn we saw in the summer months of 2008 was probably a one-off event. The arrival of the ‘09’-plate next March will clearly be an acid test for both new and used sales, and analysis of the current market indicators suggests there are reasons for cautious optimism.

“In the first instance, economists are agreed that the inflation rate has probably peaked, and that by the middle of next year the economy will be almost inflation-free. In the short term, this move will be helped by declining fuel prices and further falls in the Bank of England base interest rate, making a tangible difference to consumer’s household finances.

“As these pieces of good news are drip-fed into news bulletins, it is quite possible that the knock-on effect will be to inject a little buying enthusiasm into the minds of consumers by the first quarter of next year. It is also worth remembering that many have deferred purchases of replacement cars during 2008, so there could be some limited release of pent-up demand helped by a realisation that prices will be at an all-time low.”

Rushmore suggests the indicators are less positive for the UK’s fleet car market. “Companies are feeling the financial squeeze and, once they make policy decisions around their business activities, they tend not to reverse them very quickly. This has obvious implications for corporate fleet sales.

“Given this situation, it is very difficult to see fleet sales improving in the foreseeable future. This means that those car manufacturers that rely heavily on fleet sales will continue to find trading conditions particularly challenging.”