UK inflation reached a 40-year high of 9.1% as the pricing pressures forcing car buyers to think twice about their next purchase continued to intensify.
The Office for National Statistics (ONS) said that the rolling 12-month figure had risen a further 1ppt on April’s 9% figure in data published this morning (June 22).
Inflation is now at the highest level since March 1982’s 9.1% level and the Bank of England has warned that it could top 11% this year.
Record fuel prices are key factor in the rising inflation, with a litre of petrol reaching an average of 189.33p and diesel hitting 197.11p yesterday (June 21). It costs more than £100 to fill the average family car with petrol.
But energy and food are also delivering large increases in cost, with Grant Fitzner, chief economist at the ONS, stating that prices of goods leaving factories rose at their fastest rate in 45 years last month, driven by "widespread food price rises".
Chancellor Rishi Sunak said the UK Government was using all the tools at its disposal to bring inflation down and combat rising prices.
But Deputy Prime Minister Dominic Raab has said that it is important for employers not to accelerate pay rises in-line with inflation, amid fears that it could fuel the UK’s issues.
In an interview on the BBC's Today programme, he said: "We have got to stop making the problem worse by fuelling pay demands that will only see inflation stay higher for longer and that only hurts the poorest the worst."
Commenting on today's inflation figures, Close Brothers Motor Finance director of sales Lisa Watson said: “As expected, inflation continues to rise and create further challenges for industries including the automotive sector. With the cost-of-living soaring and fuel prices at record levels, consumers continue to face pressure from all angles.
“The government’s recent scrapping of the electric vehicle grant also limits the options for prospective buyers – even if the high prices seen in the used market are showing some signs of cooling off.
“Dealers will need to maximise every option they have to stock forecourts with cars that best meet demand and use all insights and tools available to understand consumer needs in a volatile market.
“Responsible lenders will need to continue to be innovative and flexible to meet demand. Now more than ever customers, dealers, and lenders need to be stress testing their finances and preparing for future policy decisions by the Bank of England.”
Data published by eBay Motors has suggested that one-in-five car buyers are currently putting off their next purchase as a result of the cost-of-living crisis.
In an interview with AM earlier this month, Cap HPI director of valuations Derren Martin warned retailers not to rush into making used car price cuts as consumer demand falters, however.
Martin said: “If you do reduce the price of your stock is that going to encourage people to buy if they’re holding off because of the cost of living? I don’t think so.
“It’s a case of going back to basics, really. Reduce the stock that really isn’t shifting by all means, but it’s better to hold out a bit and keep faith that the shortage of vehicles will maintain values in many cases.
“With such a reduction in-demand we’re seeing it might be worthwhile making a reduction to get a sale over the line once you have a customer on the forecourt.”
Month-to-date in June, the average used car value at three years and 60,000 miles has declined by 0.7%.
Martin told AM that he expects the moth to end with values down by 0.8%, describing the market trend as “stable”.