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A bumper year for car sales

Good news for the car industry at the start of 2015, which has come as a welcome change and a positive sign that the market is turning around. New figures from the Society of Motor Manufacturers and Traders reveal that new car sales hit a ten-year high in 2014.

Almost two and a half million new cars were sold last year in the UK, up 9.3% on the previous year. Sales have been rising steadily every month for the past 34 months. And it is the same story across Europe, with sales in the EU rising 5.7% in 2014 to over twelve and a half million new cars. Spain even managed to out perform the UK, with year-on-year growth of 18%.

What cars are people buying?

Although the economy seems to be improving, caution is still uppermost in our minds. Economical and more environmentally friendly smaller cars continue to be the favourites, with the Ford Fiesta, Ford Focus, Vauxhall Corsa and VW Golf occupying the top four positions on the sales chart. Remarkably, one in every twenty new cars sold in the UK is a Fiesta.

Electric cars are also selling well, as recharging stations spring up across the country to enhance the network. Sales were up four fold in 2014 rising from 3,586 to an impressive 14,498.

So why are car sales recovering?

Analysts have a number of theories to explain the surge in growth, especially here in Britain:

  • The biggest factor is that people are starting to see growth and stability in the economy so are more confident in buying big-ticket items like new cars.
  • The extra cash from PPI claims is also thought to be encouraging a bit of extra spending, particularly on essential but considered purchases.
  • The government’s scrappage scheme is currently having a second impact. The scheme originally boosted sales in 2010 but many of these cars have now reached the end of their finance deal term and so are being replaced with new vehicles.

Will we pay later for buying now?

Finance is now more widely available than it was during the recession, with an estimated 75.9% of new cars bought on finance.

However, this is worrying for some experts, who are concerned that the high number of ‘lease-contract’ sales will lead to a glut of used cars flooding the market in two or three years time, driving down used car prices and making new car finance more expensive. Concerns have also been raised that the predicted rises in interest rates could make new car finance less affordable.

Car sales in China slow down

The news is not so good on the other side of the world. Sales in China may have grown more than in Europe, with a 6.9% year on year rise, but that represents a significant slowdown compared to a growth of 13.9% in 2013. Nonetheless, it still makes China the biggest market by far, with 23million new cars easily eclipsing America’s 16.5million.

How the complex world market will fare over the next few years really is a big unknown but, for now, car manufacturers are seeing 2014 as a very good year and view 2015 with optimism.

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One Quote Direct Insurance Services Limited trading as Octagon Insurance Services is an appointed representative of Europa Group Limited and acts as a credit broker and not a lender in relation to premium finance contracts. Registered as a limited company in England and Wales No. 5479983. Europa Group Limited is authorised and regulated by the Financial Conduct Authority, Financial Services Register No. 309794. Registered office: Europa House, Midland Way, Thornbury, Bristol, BS35 2JX.

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