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Guest opinion: Why new car sales are on the slide

Following the 7.9% fall in new car registrations for March announced by the SMMT last week, Graham Bushby, head of motor at Baker Tilly Restructuring and Recovery LLP, looks at what’s most likely to be the root causes:

"At the same time as fleet and business sales increased year on year, retail consumers just seem to lack the confidence to splash out on buying a new car.

And who can blame them?

The steeply rising cost of living is not currently being offset by wage increases and there is the threat/promise of interest rate rises to come.

These factors tend not to generate that feel good factor we had just five years ago when house prices were roaring away fuelled by an endless supply of cheap credit.

Even the Chancellor’s efforts at giving us back 1p per litre of fuel appear rather lacklustre when a litre of petrol or diesel has risen by more than 20p in the last 10 months.

It doesn’t give you the feel good factor and confidence to go out and buy a car.

Yet it does emphasise the need to buy a fuel efficient car, despite not necessarily a new one.

This month the economic crisis in Portugal, together with the implementation of the Government spending cuts, have refocused the arguments on whether the cuts are too much, too soon or the only way forward.

The real issue is that we all yearn for good news, about our economy, our company and our jobs.

But the climb out of recession is very slow this time and this has led to consumer confidence stagnating at a depth more usually seen at the height of a recession rather than the recovery period after it.

We simply don’t believe that things are getting better: 42% of those questioned about their confidence by the GfK NOP Consumer Confidence poll thought that the economy would deteriorate further, rather than improve, in six months' time.

63% thought there would be fewer jobs available.

More than half of those asked believed it was a bad time to make a major purchase, such as a car or house.

So, it seems that we will only believe things are going to get better when we have some solid reliable evidence that it has actually already happened.

When the Chancellor’s budget revealed that all growth forecasts had declined, it was a further dent to our already fragile state of mind.

Therefore, it could well be 2012 before the great British consumer has sufficient evidence of growth that its confidence will come anywhere close to meeting the aspiration of dealers to sell them new cars."

> AM poll, in association with Baker Tilly: What do you feel is the biggest factor behind current falling new car sales? Have your say here.

This is the second of three online poll questions on key issues for the sector.

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