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Private demands boosts new car registrations by 11% in May

car purchase

New car registrations increased by 11% to 180,111 units in May and private demand is now beyond pre-recession volumes recorded in 2007.

According to the latest figures from the Society of Motor Manufacturers and Traders (SMMT) private new car registrations increased by 20.9%. While private demand is beyond recession levels, May's total new car market remains below 2007 levels.

May's new car market is the 15th successive month of growth and the largest May volume in six years.

Registrations have risen 9.3% for the year-to-date to 948,666 units.

The year-to-date new car market remains 9.2% off 2007 volumes for the same period, but trends among private buyers provide a good indication that consumer confidence is strong.

Scotland posted the biggest growth in May with registrations up 17.54%, Wales up 17.36%, NI up 12.21% and England up 10.44%.

The growth is against the backdrop of stagnant UK household incomes, forecast to rise by only 0.5% in 2013 by the Office for Budget Responsibility and continuing falls in new car sales throughout Europe, including the stronger economies such as Germany, which fell 9.9% in May 2013.

Mike Baunton, SMMT interim chief executive, said: “The performance of new car registrations in May marks a significant milestone for UK automotive, with cars registered by private buyers rising more than 20%, bettering pre-recession volumes posted in 2007.

"While it is clear that buying confidence among UK motorists is very strong, continued economic uncertainty abroad, particularly in the rest of Europe, will mean that manufacturers remain cautious about performance in the second half of 2013."

Sue Robinson, director of the National Franchised Dealers Association (NFDA), said: "It is now evident that consumer confidence in buying cars is back on track."

The growth in new car registrations in May reflects a combination of factors, which may include consumers returning to the new car market after delaying regular replacement cycles, motorists replacing vehicles bought under the scrappage scheme, motorists switching to more efficient vehicles in every class and attractive offers catching the attention of buyers with funds and access to finance.

A switch from used to new may also be occurring, as the recession-induced dip in new car sales restricts the supply of used cars.

The Ford Fiesta was the best selling model in both the month and year-to-date.

Download the full May new car registration figures from the SMMT.

Analyst view

KPMG

John Leech, UK head of automotive at KPMG, said: “The UK new car market continues to significantly outperform European markets and the rest of the UK retail sector.

“I believe there are a number of factors behind this outperformance.  Firstly, given the weakness in Eurozone markets, car manufacturers have turned their attention to the UK to keep their factories busy.  The new car market in the UK continues to be buoyed by substantial discounts offered by car manufacturers directly to consumers, such as 0% finance.  Analysts at CAP Automotive recently claimed that motorists are enjoying the best new car deals since 1979. 

“Secondly, UK banks are midway through settling PPI misselling compensation claims with UK consumers, which have averaged £2,700 per claimant over the past two years and totalled £9 billion so far.  These one-off lump sums have released pent-up demand for cars.

“Finally, there have been some real advances in fuel efficiency offered by car manufacturers in response to a trend for consumers to favour smaller, fuel-efficient cars, which are up 14% year-to-date.  At 7.5 years old, the average age of cars on the UK roads is now higher than at any time over the past 20 years and consumers are increasingly choosing to switch these older cars for newer, much more fuel-efficient vehicles.

PwC

Phil Harrold, PwC automotive partner, said: "The renewed confidence in the economy appears to be continuing through the automotive sector - as echoed through other recent announcements.

"The majority of the uptick seen is around private cars, rather than company vehicles, and it's good to see investment return in that sector.
 
"I also do not think this trend will  be necessarily just short-lived but rather something that will continue to pick up as confidence grows."

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