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Stagnation of British car market expected

Interest rate rises designed to curb UK consumers' current spending frenzy is likely to trigger a car market stagnation. Since the end of 2003, the Bank of England has been attempting to counter the danger of the economy overheating by gradually raising key interest rates. Car demand is likely to follow and market researchers at RL Polk expect a slight drop in 2004, to 2.54m new registrations (-1.5%) after three record-setting years.

Another reason for the market decline expected this year by automotive experts is the stabilization of new car prices. Due to their high level compared to other EU countries, British prices have declined drastically. However, prices have shown a moderate increase since the beginning of 2004, as potential buyers contend with rising financing costs and higher new car prices.

RL Polk expects the market to drop further from 2005, approaching normal levels.

“Although the overall economic trend is still positive, the stabilization of car prices, the slowdown on the real estate market and the continued rise in interest rates means the major factors to stimulate car demand are now missing.

In addition, British households, which have accumulated a high amount of debt, are expected to enter a period of reduced spending. As a result, the British car market will drop to about 2.38 million new registrations (down 6.3%), “ it says.

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