Fleet News

VAT rise had notable affect on the new car market in December, says RMI

New car sales figures show month on month sales were down 18%, but up 4.6% if cars sold as a result of the scrappage scheme were not included. Furthermore, with many manufacturers and dealers offering to absorb the cost of the 2.5% VAT increase, sales for January have the potential to benefit.

New car sales for 2010 were up 1.8% on 2009, with over 100,000 cars registered through the scrappage scheme. Despite this, sales in 2010 were still the second lowest in a decade.

Sue Robinson, RMI Franchised director said "2010 has been a difficult year for dealers, but the sales are there, boosted greatly by scrappage. It's very telling that Ford's Fiesta is the top selling model, showing that consumers are seeking fuel efficient, good value cars"

"Dealers, aware of consumers concerns about the cost of servicing and maintenance, introduced a variety of deals. Vauxhall's ‘Life time warrantee' for example, saw the brand topping the sales chart in December, as consumers prepared to deal with the implications of Government cuts and the knock on affects on their household budget," Continued Robinson.

Looking forward to the year ahead, Robinson added, "with the cost of fuel rising towards 130 pence per litre, the motorist has to think carefully before purchasing a car, taking into consideration the efficiency of the vehicle, its' likely depreciation and, in light of the economic uncertainty, whether they're willing to commit to finance deals".

Robinson continued, "dealers are indicating that interest in used cars is elevated. Furthermore, the value of this sector is amplified as consumers decide not to replace their new cars, meaning that there are less used cars on the market."

"The first half of 2011 was always going to be challenging for car dealers, as consumers ascertain how the VAT increase, fuel price rises and the growing cost of other commodities such as bread, cotton and coffee, affect their household budgets," said Robinson

Robinson commented that, "We are also mindful of the regional variations, with some areas of the country affected more significantly than others by the Government cuts and general deficit reduction strategy."

"However, dealers are aware of the issues affecting consumers, and there are offers available on forecourts, such as VAT freezes and various payment plans."

December sales were, as with other retail sectors, affected by heavy snowfall which saw much of the country unable to make long or non-essential journeys.

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