Interest rate cut beckons as car sales fall again

Thu, 21 Jul 2005



Recent figures show that sales for new cars are lower than previous months. In June car registrations were down by 4.8 per cent on June last year, according to the Society of Motor Manufacturers and Traders.

The figures show an overall fall of 5.8 per cent compared with the January to June period in 2004. However business and fleet sales are buoyant, but sales in the private sector have fallen by 72,295 since January. This accounts for 45.3 per cent of the British market, compared with 47.9 per cent a year ago.

"Higher interest rates and other pressures like increasing fuel costs appear to be having an impact on new car purchases," the SMMT said.

Economists see the figures as a strong indication that consumer spending is slowing after a succession of quarter-point rises in the base rate.

With the housing market struggling and the manufacturing sector pleading for help, it is felt that the Bank of England could announce a cut in base rate.

SMMT chief executive Christopher MacGowan said the record level of sales seen in the first half of 2004 could not be sustained in the current climate. He went on to say "However, while interest rates begin to bite across all retail sectors, figures from the car sector remain healthy," he said.

"Dealers may be feeling the pinch but there is good news for consumers. More models are coming on the market and car prices have tumbled by ten per cent since 1998.

"Combine these factors with deals like nought per cent finance, free insurance and money back offers and you have all the ingredients of a true buyers' market."

Low June sales figures reflect the impact of the demise of MG Rover on the British new car market. Residual sales of only 256 MGs and 204 Rovers were recorded on the SMMT database, showing falls of 91.49 per cent and 94.23 per cent.

The loss of MG Rover accounted for approx 75 per cent of the overall slowdown in the market in the second quarter, but represented a modest 53 per cent of the market's loss in June, the organisation said.

The collapse of the British owned carmaker means that vehicles built outside the country accounted for 83.4 per cent of the market in the second quarter, up from 81.7 per cent this time last year. Sales of Land Rover cars saw a rise of 1.62 per cent in June. This was partly due to a demand for the new Range Rover Sport and helped offset a decline in sales.

Jaguar saw its sales dip slightly to 3,229 in June and the company was 21.30 per cent down in the first six months. The sales reflect Jaguar’s decision to concentrate its marketing on higher cost models. There are high hopes for the new diesel version of its XJ saloon due out in September which will make inroads into the growing market for luxury cars powered by diesel engines. The Mini Cooper continued to buoy with sales in June up by 20.83 per cent at 4,159.

Ford announced savings across the company's range, with low-rate finance deals and no minimum deposit schemes. Offers run until September 30 2005, contact local dealers for full details.
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