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Guest opinion: are PPI claims fueling the growth of new car sales?

Chris Green, co-founder and director of new car enquiry website Motoring.co.uk.

"A total of £524 million was paid in October 2013 to customers who were sold Payment Protection Insurance (PPI). This takes the amount paid out since January 2011 to £12.9 billion.

During this same period, new cars sales have been steadily rising with UK dealers seeing new car registrations increase by 10.8% in 2013 to 2,264,737 units, according to the latest figures from the Society of Motor Manufacturers and Traders.

This growth in new car sales over the last couple of years could be fuelled by the PPI pay outs.

The SMMT maintains that consumer and business confidence, after an extended hold-off period and a competitive market place has helped fuel sales growth. However, there is every possibility that many consumers have been happy to invest in a new car because they have received large cash lump sums from successful PPI claims.

The huge number of PPI pay outs over the last two years have had a major impact on consumer confidence and spending.  The ombudsman has received more than one million PPI cases and two thirds of these complaints were made in the last 18 months. Over the last two years, there has been a massive pay out of over £12bn.

During this period, new car sales are rising. 

2013 saw the total of new cars sales show the highest volume since 2007 and the market is now 5.8% behind pre-recessionary levels, with December’s performance (up 23.7%) marking the 22nd consecutive monthly rise in registrations. 

On average, an additional 600 extra cars registered per day in 2013 than in the previous year.

The increase in private registrations accounted for two-thirds of overall market growth. In 2013 private buyers accounted for 47.5% of the market, up from 45.5% in 2012.

Recent stats show there is significant growth in the number of consumers acquiring new cars on personal contract purchase (PCP) or personal contract plan, rather than using cash.

The surge in new car sales has partly been driven by the growth of PCP, with the number of plans up 50 per cent across the new and used car markets in the year to August 2013, according to the Finance & Leasing Association.

However, this is not the whole story. 

During the last two years, we have also seen a boom in the home improvement market and the emergence of a plethora of TV programmes dedicated to showing consumers how to make money out of property and adding value to their home. It is my belief that this is no coincidence.  Consumers are splashing out on their two biggest ticket items – cars and homes because of available cash, thanks to PPI.” 

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