SOARING NEW CAR SALES
NEW Car sales are soaring with total registrations to the end of Q1 of 2016 up 28% (82,780 units) on 2015 figures (64,488 units).
The Motor Trade is predicting another boom year and looks on target to exceed 140,000 units for the year. There has been 51 months of high growth in the New Car Market with two consecutive years where increases of 30% year-on-year have been achieved. Similar trends are being predicted for 2016. But what is driving the growth and is it sustainable?
The current growth in the new car market is being driven by a number of factors.
The economic recovery following on from many years of austerity has meant that many consumers are returning to normal buying patterns for the first time and purchases such as buying a new car which had previously been postponed are now back on the agenda.
Shortages of stock in the used car market have made this sector unattractive and many are finding out that it can be cheaper to buy a new car than a one or two-year-old used car.
Allied to this, attractive car finance offers such as PCP adds rocket fuel to the new car market fire by making it ultra-affordable to drive a new car.
However, Car History experts Motorcheck. ie, said we could be creating a bubble in this market that may create problems for consumers and the motor trade alike.
Commenting on the trend, Michael Rochford Managing Director of Motorcheck.ie said: ‘ The continuing rise in new car sales is great news for the motor trade and the economy in general.
‘But we should be aware that prices in the used car market have risen in recent years due to the stock shortages created by the downturn. This has kept residual values high and made finance deals such as PCP more affordable. But the growth of PCP means a glut of relatively young used cars will hit the market when those three-year deals expire.
‘It is very likely that the used car market will begin to see values start to slide over the coming years as a result of supply pressures being eased,’ he said.
The effects of this could be felt by the consumer as well as the car manufacturer or banks, Rochford added that ‘ the consequence for the consumer is that their next PCP may not be as affordable due to reduced residual values whereas the manufacturers and banks they may end up taking a hit on disposal prices if they don’t price their books accordingly now’.
The advice given to consumers is to remember that you won’t own the car at the end of your PCP so plan in advance what you are going to do at the end of the finance term.
‘Make sure you have access to the funds to either buy out or refinance the car at the end of its PCP term,’ said Rochford, ‘or alternatively make sure you save for a deposit on a new PCP as you won’t own a car to trade-in when you are going for your second PCP.’
Meanwhile, the Society of the Irish Motor Industry (SIMI) first Quarterly Motor Industry Review, in association with DoneDeal, highlights the progress that the Motor Industry has made so far this year while presenting an outlook for the coming year.
The key drivers of new car sales look set to remain positive, with the current momentum of the Irish economy strong, employment set to increase, improved earnings and consumer confidence remaining positive.
Against this background, Jim Power Economist and author of the SIMI/DoneDeal Report said: ‘New car registrations should be capable of expanding by around 25%, giving total sales of 156,181 for 2016. Looking ahead to 2017, while it is impossible to forecast that far ahead with any degree of confidence, another good year should be in prospect for the auto industry.’
Alan Nolan Director General SIMI said: The first quarter of 2016 has been a strong start for our Industry, with VAT and VRT receipts for new and used cars totalling €752.4 million, 31.4% ahead of the first quarter of 2015 demonstrating that car sales continue to make an increasing contribution to the Exchequer.
‘ The increase growth in sales is partly due to the pent-up demand from older cars been replaced with new ones over recent years and we would expect to see the Industry continuing to improve towards more normal levels of sales with a projected €1.3 Billion likely to be collected for the Exchequer towards the end of 2016 for new car sales.’
Figures from DoneDeal, Ireland’s most popular motoring site, mirrored the growth rate seen in the Motor Industry, with their car section advertising volumes increasing by over 11% on the same quarter last year, with a total advertised value of over €1.4 Billion in the Motor section alone for Q1 2016.