Hello John, got a new motor?

We’re in the midst of recession – or are we? I can’t quite keep up with the dipping in and out. But one thing is for sure – the economic climate hasn’t stopped us splashing the cash on shiny new motors, as the latest figures from the Society of Motor Manufacturers and Traders shows that new car registrations grew by 11% in May. And with a total of 180,111 new cars shifted from the forecourts, more were sold this May than in any of the corresponding months during the previous six years. So do these stats mean we’re witnessing the green shoots of economic recovery in action?

Why the resurgence in the car market?

April saw inflation fall to 2.4% - the lowest it’s been this year – but while this has undoubtedly given many households a welcome boost, it’s unlikely that it would be enough to give anyone the extra spending power to go out and buy a new car. So what could have prompted this this upturn in sales? One possibility is that people have been hanging on to their cars, perhaps because they have been feeling the squeeze and a new car has not been a realistic option, and this has delayed the regular replacement cycle. Another reason could be that more people are looking to buy newer, more fuel efficient vehicles as a reaction to the recent rise in petrol prices. Although the screen prices on such cars is usually pretty high – for instance, the ultra-fuel efficient Chevrolet Volt will set you back £35,000 – it could be that people are willing to take this initial hit in order to save money in the long run on fuel costs, road tax and possibly even car insurance. If more people are buying new cars as a longer term investment than in previous years, then we could see a permanent change in the buying cycle that will lead to longer periods of slower activity in the market - and there is anecdotal evidence to suggest that dealership footfall is already on the wane. It could also be the case that people are finding they are being accepted for better credit deals once again, be that through dealership finance deals or personal loans. New car buyers may also be dipping into their savings given that saving accounts rates are currently on the floor.

This year’s best selling cars

  May 2013 Sold Total 2013 Sold
1 Ford Fiesta 9,316 Ford Fiesta 51,708
2 Ford Focus 7,522 Ford Focus 38,547
3 Vauxhall Corsa 6,634 Vauxhall Corsa 37,279
4 Volkswagen Golf 5,247 Vauxhall Astra 26,657
5 Vauxhall Astra 5,211 Volkswagen Golf 26,656
6 Nissan Qashqai 4,243 Nissan Qashqai 22,605
7 BMW 3 Series 3,828 Volkswagen Polo 18,854
8 Volkswagen Polo 3,201 Peugeot 208 17,166
9 Peugeot 208 3,083 BMW 3 Series 16,156
10 Audi A3 3,055 Nissan Juke 15,623

Ways to pay for a new car

There are several ways you can fund a new car. and so you should weigh up all of your options and work out which is the best deal for you before committing. Kevin Mountford, head of banking at MoneySupermarket, offers his thoughts on the available options:“There are some great finance deals available to buy new cars whether direct from car dealerships or through you bank or building society. Choosing a finance deal through a dealer may appear to be good value as many are offering a range of benefits at low rates, however, anyone looking to purchase a new car should consider the alternative options. “Taking out a personal loan through your bank allows you to own the car outright, unlike with other car finance which will usually be owned by finance firm until the debt is repaid. Having cash in hand through a personal loan may also give you greater bargaining power in the show room and you may be able to negotiate bigger discounts as a result. “As well financing to buy a new vehicle, you should also consider the other options of leasing the vehicle, or taking out a Personal Contact Plan (PCP). Leasing is good for people who want to have the use of a new car without the hassle of owning it. A PCP deal allows users to reduce their monthly repayments by deferring a lump sum payment to the end of the agreement.” And if you’re in the market for a new, fuel efficient car, read my article 10 cars that will cost you less at the pumps. [text-blocks id=cta-banner]

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