New car sales predicted to fall 5% in 2017
New car sales may have peaked in 2016, according to a report by research firm GfK which predicts that sales will drop by 5% this year.
The study describes 2016 as a "landmark year" for new car sales in the UK but says that 2017 looks set to end the post-recession climb in new vehicle sales.
Joe Staton, head of market dynamics at GfK, explained: "Our latest data shows that, certainly in terms of car sales, Britain's post-Brexit consumer boom shows signs of weakening in the face of higher prices and rising inflation."The report highlights three particular challenges that vehicle manufacturers and retailers will need to manage:
1. The impact of Article 50, and the potential impact of Brexit on interest rates on loans: As a large part of the UK car market is funded by financing, the loss of 0% finance offers and overall APR increases could push more customers to hold off on buying a new car.
2. The new rates of vehicle excise duty due to start from April 2017: This will see many low emission models that are currently exempt becoming liable for the tax. An additional tax payable for five years post-purchase on vehicles over £40,000 may also lead some customers to downsize their purchases.
3. Rising prices: Many manufacturers are likely to increase the base costs of their cars to account for the weaker pound and higher raw material costs.
According to GfK, 79% of consumers believe that consumer prices in general have risen over the past 12 months, and 74% expect prices to rise in the coming 12 months.
The proportion of people earning more than £50,000 who reported an intention to buy a new car in the next 12 months dropped from 53% in January 2016 to 42% in January this year.
New car sales in the UK reached the highest level for 12 years in 2016, with a total of 2,692,786 new cars registered, up 2.3% on the previous year.
