Expert Blog

Are Britain’s booming car sales all they’re cracked up to be?

September is generally a good time for car sales. It is, after all, when the latest number plates are released. Drive off with a new car this month, and the third and fourth digits on its front will read ‘65’. Motorists with last September’s 64-plates will be incurably jealous. Bystanders will know that you’re totally up-to-the-minute. You’ll probably win more friends and influence people.

But car sales have been booming even without the help of those digits. The latest figures show that 79,060 new cars were registered in August, which is typically a quieter month. This is 9.6 per cent higher than the total from August last year. July’s total was higher than last July’s total, June’s total was higher than last June’s total… and so on. In fact, car registrations have been growing in this way for 42 consecutive months.

We’ve captured this sales explosion in the graph at the top of this post. It shows the rolling annual number of car registrations for each month in the last five years. You’ll have to go back to February 2012 to find a period of decline. In the year to this August, some 2,578,469 cars were registered.

This is encouraging in many ways. Increasing car sales suggest improving consumer confidence which, in turn, suggests a growing economy. So, who could complain? Well, ‘complain’ may not quite be the right word, but I’d certainly like to sound a couple of notes of caution.

The first is one that we’ve sounded before on this blog: a lot of these sales are being funded by debt. According to the Finance & Leasing Association, over £26 billion of financing was made available for car sales in the year to June, which is 14 per cent higher than the previous year. This needn’t be a problem in itself, so long as people can afford to make their payments. But, after the whole sub-prime crisis, the thought of rising debt is somewhat sobering.

And the second comes courtesy of the fine minds at Glass’s. They reckon that ‘a falsely buoyant picture is likely to be painted by September’s new plate change’ – and the reason they give is the prevalence of pre-registrations. These are a rather peculiar feature of our automotive market. What happens is that dealerships register new cars to themselves in order to meet targets and receive incentive payments from the manufacturers. They then sell on these cars as ‘used vehicles’, to actual consumers, at a later date.

This practice means that not all of the new registrations are actual sales, as we’d normally understand them. Some of these cars will remain on forecourts well into next year, or even beyond. 

So perhaps we should stick a health warning on the graph at the top of this post. New car registrations are on the up, up and up – but registrations alone don’t tell the whole story. 

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