New Car Market Declines, Used Car Market Soars
Last month saw the largest decline in the new car market in the UK in over 2 years. Figures by the Society of Motor Manufacturers and Traders (SMMT) showed that across all sectors, there was a 6% drop compared to this time last year, the biggest drop since July 2022. Private sales fell by an even greater margin, with 11.8% fewer new cars sold during October than in 2023, and business registrations further still at 12.8%.
Are People Just Not Buying Cars?
Quite the opposite. Whilst new registrations fell quite dramatically, used car sales have surged 4.3% in the past quarter to new record levels. This is particularly notable for pre-owned electric vehicles, which according to the SMMT soared by 57% compared to the same time last year. As a market share for pure electric vehicles it now stands at 2.7%, up from 1.8% at the same point in 2023.
But it isn’t just hybrid vehicles seeing an increase in used sales, hybrid vehicle sales grew by almost 36% with plug in hybrids also seeing a rise of 29%. It was mixed results for combustion engine vehicles, with pre-owned petrol sales seeing a 5.7% increase however diesel vehicle sales continued to decline by a further 3.9%.
What Is Causing The New Car Decline?
There are a number of factors causing the decline in new car sales, and all seem to create a perfect storm of uncertainty for potential buyers. As a finance broker, we see more and more customers funding vehicles each year, however the percentage of those being new vehicles see a similar trend to the wider industry. So what is causing the fall in new car sales?
For starters, many consumers have got used to paying reduced rates for finance thanks to historic lows over the past few years. The recent economic factors have meant that rates had risen to levels not seen since the last recession, and whilst they have started to fall again, many are stalling to see if the rates are going to reduce further.
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The Bank of England Base Rate decrease filtering down to car finance rates is often unpredictable and takes time however, so those expecting rates to fall further may be disappointed for now. With rates being so different between new and used vehicles, and across different manufacturers as well as dealerships and independent garages, now is the perfect time however to ensure that you are getting the best finance package for your circumstances through a broker like ourselves.
Another factor caused by the cost-of-living crisis and the prices of everything from fuel to materials rising is the fact that new car prices have also risen quite dramatically. Higher costs for supplies and parts, shortage of certain components, transporting of these parts and even the vehicles themselves, caused a trickle down to new vehicles becoming more expensive to manufacture and therefore prices rising. Whilst this is apparent from the increased list price of many new vehicles, it becomes more obvious when shown in a monthly cost of a finance package.
What About Car Prices?
As an example, the price of some vehicle price increases over a 12-month period from 2021 to 2022 are quite considerable. A base Porsche 718 Cayman had a list price of just over ￡45,000 in 2021 yet increased over 20% to ￡54,500 by 2022, a Volkswagen Touareg rose over 18% from ￡46,780 to ￡55,320 and supercars such as the Audi R8 saw a price increase from just over ￡115,000 to nearly ￡130,000, a rise of over 12.5%. The ability to move up to the next model or upgrade to a more premium manufacturer when it comes time to change your vehicle becomes that little bit more challenging. That’s without factoring into the equation that EV’s are generally more expensive to buy then combustion engine cars in the first place.
Even the uncertainty of the combustion engine ban itself is having a big effect on people deciding exactly which new car to purchase. Is it coming into force in 2030, or 2035, or might it be put back even further. Do you take the plunge and go straight from a combustion engine car to an EV, do you go halfway and go hybrid, if so what type of hybrid are you looking for? New car buyers have more to think about, more choice and more factors to consider about exactly how they use their vehicles, meaning they are more likely to delay the decision just that little bit further.