Confidence is a strange concept, both at an individual level, and when one looks at consumer confidence.
At the university, we help to build confidence in individuals by giving them insight and knowledge that allows them to analyse situations and make decisions confidently, with the assurance that there is an underlying rationale to what is proposed. Confidence is
something that underpins both how we feel about ourselves and the subsequent actions that we may decide to take.
A lack of confidence at the consumer level is being given as the reason for the continued decline in new car sales during this past year. The argument runs that consumer spending slows down when there is political and economic uncertainty. A general lack of confidence brought about by an uncertain future will make people reflect on both their circumstances now and also their future prospects. This makes sense – if one is being more cautious about one’s spending, maybe a new car is something that one can put off.
My problem is in trying to understand what is actually going on in the market. The argument is that people delay changing their car in a period of uncertainty. But if, as the data shows, somewhere upward of 84% of new cars are sold on PCPs or PCH contracts, then all of those customers are currently operating on an agreement with a definitive end point. There has been a rise in used car sales, which could suggest that people are coming out of new car contracts and moving into the used market. The problem is that there is no ready source of data to substantiate this.
With the battery supply problems for AFVs, this could account for the rise in the sale of used hybrid and EV vehicles. The rise in the sale of used diesels (as sales of new ones continue to decline) has to be based on competitive pricing for these vehicles making it attractive for the customer to trade down.
All of this is logical, but the bit that I don’t understand is why lack of confidence moves people away from buying new cars. The PCP and PCH offers currently in the market are in some cases better than they have been for some time. This type of contract surely gives the customer certainty over payments and also reassurance that they are driving a new car, which is unlikely to produce any unpredicted bills. There is also a clearly defined end point.
As I said at the start, individual confidence is improved if the person is better informed and fully understands the situation they face. Perhaps as a sector we need to do more in building consumer confidence, not necessarily in the economy, but in our ability to help people overcome their uncertainty. We could do more in promoting how good our financial offers are in future-proofing the customer’s financial exposure. If we achieved this, it would hopefully give them confidence in wanting to buy.