New Car Sales up 28% in Q1 2016 but are we creating a “Car Finance Bubble”

Latest New Car Registration stats show a 28% increase Q1 2016, but with one third of all cars sold on finance we could be creating a “Car Finance Bubble” that can’t be sustained.

According to figures released today by Car History experts, New Car Sales continue to soar with total registrations to the end of Q1 of 2016 up 28% (82,780 units) on 2015 figures (64,488 units). The Motor Trade is predicting another boom year and looks on target to exceed 140,000 units for the year. There has been 51 months of high growth in the New Car Market with 2 consecutive years where increases of 30% year-on-year have been achieved. Similar trends are being predicted for 2016. But what is driving the growth and is it sustainable?
The current growth in the new car market is being driven by a number of factors.

  • The economic recovery following on from many years of austerity has meant that many consumers are returning to normal buying patterns for the first time and purchases such as buying a new car which had previously been postponed are now back on the agenda.
  • Shortages of stock in the used car market have made this sector unattractive and many are finding out that it can be cheaper to buy a new car than a one or two year old used car.
  • Allied to this, attractive car finance offers such as PCP adds rocket fuel to the new car market fire by making it ultra-affordable to drive a new car.

However we could be creating a bubble in this market that may create problems for consumers and the motor trade alike.

The continuing rise in new car sales is great news for the motor trade and the economy in general. But we should be aware that prices in the used car market have risen in recent years due to the stock shortages created by the downturn. This has kept residual values high and made finance deals such as PCP more affordable. But the growth of PCP means a glut of relatively young used cars will hit the market when those three-year deals expire.
It is very likely that the used car market will begin to see values start to slide over the coming years as a result of supply pressures being eased.
The effects of this could be felt by the consumer as well as the car manufacturer or banks. The consequence for the consumer is that their next PCP may not be as affordable due to reduced residual values whereas the manufacturers and banks they may end up taking a hit on disposal prices if they don’t price their books accordingly now.
The advice given to consumers is to remember that you won’t own the car at the end of your PCP so plan in advance what you are going to do at the end of the finance term.
Make sure you have access to the funds to either buy out or refinance the car at the end of its PCP term, or alternatively make sure you save for a deposit on a new PCP as you won’t own a car to trade-in when you are going for your second PCP.
Car Sales Stats below…

New Car Sales Highlights:

New car stats

  • Car registrations for Q1 2016 increased 28% (82,780) against Q1 2015 (64,488)
  • March 2016 sales were 13.5% ahead of March 2015 (21,466 vs 18,909)
  • The top selling manufacturers were Toyota, Hyundai, Volkswagen, Ford and Nissan
  • The top selling models were the Hyundai Tucson, Volkswagen Golf, Ford Focus, Nissan Qashqai, and Skoda Octavia

Light Commercial Sales Highlights:

New LCV stats

  • LCV registrations for Q1 2016 increased 34% (13,461) against Q1 2015 (10,075)
  • March 2016 sales were 21% ahead of March 2015 (3,435 vs 2,838)
  • The top selling manufacturers were Ford, Volkswagen, Renault, Toyota and Peugeot
  • The top selling models were the Ford Transit, Ford Transit Connect, Volkswagen Caddy, Renault Traffic and Toyota Landcruiser.

New car models
Top LCV models