Motor Dealers – It’s back on (well providing it’s on finance!)

The last three years have been tough… right? When we first went into recession in 2009, consumers went into a saving frenzy. Then through 2011 and into 2012 we went from hoarding our disposable income to repaying outstanding debt. Consumers have had to sacrifice a lot of secondary spend items over the last few months and this looks set to continue. One article I read reckons Britain has another 18 months of financial pain ahead of us, as incomes are rising slower than the rate of inflation. (Is it appropriate to pull a sad face at this point?)

So imagine my surprise when I saw the headline ‘New car finance sales rise 22% in March’! There is no doubt this has had a positive impact on the motor trade and dealer finance companies. What I want to know is what has spurred this sudden surge of new car purchasing?

New car sales rose 22% by volume and 33% by sales value in March 2012 compared to March 2011. So not only are more consumers using dealer finance to aid their car purchase but they are also spending more per transaction. (It doesn’t stipulate if this is down to a higher value car of if they are using smaller deposits)

How about the used car market? Well March saw an increase of 6% in the number of used cars sold on finance in March 2012. In total 74,000 used cars were taken out on finance in this month.

2011 saw the UK car market fall by 4.4%, this was the worst year for the industry in at least a decade. That said it was also the first year in Britain that diesel sales overtook petrol sales as the most popular fuel choice. Now the source I got this information from went on to speculate that the British are concerned about their carbon footprint, but I think it’s more likely to be linked to the rising cost in fuel prices. I also found out that most of the cars sold in 2011 (35%) averaged between 55-70 mpg, so my theory is probably closer to the truth. Could it be that the cost of a car finance payment on an economical car is the same as the savings on our old petrol bills?

As a general rule finance from a dealer tends to be at a higher rate than from a high street lender. But high street lenders aren’t lending as much or as often as what they were in the past. I wonder if this has contributed to the increase in the number of people taking out dealer finance?

Have we as consumers simply had enough of budgeting? We have seen the boom in the staycation market as many aren’t in a position to justify their annual week in the Algarve. Could this be the start of a mini boom in the car market? After all is it actually a secondary spend or could we argue (if we wanted too) that a car is an essential spend? Are we justifying the purchase by telling ourselves that it’s not in fact a ‘treat’ but a necessity?

Now for ‘The Little Nuggets’

  • 54% say their car should be equipped with all possible safety features
  • 44% like driving
  • 16% like innovative cars

(All figures quoted are for the Welsh average: Source – GB TGI Radio+ 2012Quarter 2, Kantar Media, Wales BARB Region)

As always I would be interested to hear from you, please leave a comment or contact me on jodi.stuart@realradio.co.uk or @realradiojodi

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