The latest regional planning report from information services company Experian predicts a further downturn in house prices and an increase in unemployment for the first time since 1992.
It said this would have a ripple effect into the car market, where spending would be curtailed on larger engined cars such as SUVs, MPVs and sports cars.
It does not expect growth in household spending to return to 2007’s level until 2011 or beyond.
Kirk Fletcher, managing director of Experian’s automotive division, said: “The challenge for dealers is to watch the trends, identify areas of growth and recognise what motivates different kinds of customers.”
Financial concerns meant more consumers were putting off car purchase decisions, although growth was still being achieved in the 4x4, MPV and sports car segments.
Fletcher said: “There will still be pockets of growth in the market, but these will change and evolve.
One indication of this is the widespread switch from petrol to diesel cars. In the coming years, the least polluting cars are likely to become the top sellers.”