UK new car prices have risen 5.2% on average since the UK voted to leave the European Union, according to new research by What Car?. Nevertheless, high consumer confidence since the vote has meant the UK’s new car market hit its highest level since 2005 in January, and has still not peaked according to the country’s largest car dealership, Pendragon.
What Car? editor Steve Huntingford said: ‘We knew average prices were going up, but rather than a gradual rise, our research has shown that there has been a perfect storm of elements that has conspired to create a big bang in price hikes.’ He highlighted rising inflation and the car industry’s endeavours to increase dealer profitability that has meant UK car buyers have faced nearly £2 billion in price hikes over the last seven months since the vote.
The weak pound has led to an increase in the cost of importing both cars and the raw materials that go into their production. The average British-made car has only 41% of its components made locally.
Manufacturers are also seeking to control and boost their profit margins, reducing discounts and withdrawing many of the most appealing 0% and low-interest finance deals. Vehicles priced at less than £200 per month – much sought after by car buyers – reduced to only 9.9% of the market, compared to 13% seven months ago with the same deposit. Nevertheless, finance deals in the UK remain strong in all sectors.
Imported goods are also set to get more expensive as inflation rises: on Tuesday inflation reached its highest rate in 2.5 years, as pump fuel prices rise.
However, this has yet to weigh on the UK new car market. Car registrations are generally viewed as a strong indicator of consumer confidence and the wider economy – and leading car dealership Pendragon said on Tuesday that it is confident that easy access to consumer finance will avert any short-term declines in the market. This is despite the company’s own new car sales falling 1.4% in 2016.
The Society of Motor Manufacturers and Traders predicts that the UK economy will peak in 2017, with a 5% decline in sales after years of strong growth.
Meanwhile, Brexit is also impacting the Irish automotive industry, with new car sales in Ireland falling in January, the first monthly decrease since 2013, according to the Society of the Irish Motor Industry. The sharp decline in the value of the British pound has caused a surge in used car imports, with almost 7000 cars imported and licensed for the first time in Ireland in January – almost double the amount a year ago. This caused registrations to fall 1.6% to 26,500 in January – a crucial month for the industry as Irish customers usually flock to buy cars with new registration plates.
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