Car sales fall as cost of ownership and economic uncertainty rises

Data released by the Society of Motor Manufacturers and Traders (SMMT) has shown that new car registrations were down for the third month in a row in June. The SMMT predicts that new car sales could end up being 5% down in 2017 (compared to 2016) if the trend continues. This would be the first time since 2011 that new car sales have fallen year on year.

New car sales have for a long time been an indicator of economic prosperity. When people feel better off, they buy new cars. However, something feels different this time. It looks like a series of exceptional circumstances, rather than just a poor outlook on economic prosperity, is causing this to happen.

General election and Brexit

The recent snap general election and the start of Brexit talks, have been blamed for the drop. People are often wary of buying high value items during times of political uncertainty. Buying a new car is not necessarily a sensible move when finances could quickly become unstable.

However, with sales down 4.8% compared to a year ago, and diesel sales suffering the most, there are several other reasons why this may be happening. In addition, it seems that the types of cars that people are choosing to buy are changing too.

Diesel sales were down 14.7% in June. This indicates that drivers are opting for petrol or alternative fuel cars such as electric and hybrid models, instead of once popular diesels. This is likely due to extra charges that have recently been put in place, which make diesel cars more expensive to own and run.

Taxes and duties on the rise

For example, the new Vehicle Excise Duty that was put into place in April means that those who own vehicles that produce more emissions, such as diesel cars, need to pay more tax, with a flat fee of £140 and a surcharge of £310 for cars which cost over £40,000. The tax change is one possible reason why car sales have fallen, as only those who buy a car following the change have to pay these higher tax charges.

Another cost that will affect diesel car drivers is the T-Charge, or Toxicity Charge, which is being introduced in London in October. The charge will need to be paid by drivers whose cars do not meet specific exhaust emissions standards. It will set them back £10 per day when they drive through certain areas of the capital.

Similar schemes to punish diesel car drivers for idling outside schools or driving into major urban areas are also being considered by 20 UK towns and cities. For example, one local council is trialling a scheme that is charging parents for bringing their children to school by car, rather than by public transport.

Alternative fuel car sales see growth

In contrast to this, alternative fuel vehicle registrations have seen a 27.2% year on year increase. Around 50,000 electric and hybrid cars have been added to the road so far in 2017. They make up 4.4% of all new vehicle registrations for the year, showing that people are becoming more aware of their impact on the environment.

However, 50,000 electric or hybrid new cars is still a drop in the ocean compared to the 2.3m new cars sold with petrol or diesel engines in 2016. It demonstrates how far the industry has to go before alternative fuels become a viable alternative to combustion engine cars.

Volkswagen Golf is top-selling new car

One more detail which has come out of recent research, and surprised many in the motoring world, is that the Ford Fiesta was not the number one bestselling new car in June. This is the first time it has been knocked off the top spot since December 2014.

Instead, the Volkswagen Golf took the crown, with just over 200 more sales than the Ford Fiesta managed to achieve. This is hugely ironic given the almost weekly punishment beatings Volkswagen is getting in the media at the moment. The latest is the furore around 50,000 drivers stating they have lost power due to the removal of the diesel defeat system. This has apparently resulted in “limp mode,” with some cars losing power completely.

With so many changes putting diesel cars out of favour with motorists, and people turning towards alternative fuel vehicles instead, our roads could start to look quite a bit different over the next few years. Here at PetrolPrices we’ll be sure to keep you posted regarding the latest changes.

What do you think about the drop in new car sales figures? Have you changed from diesel to alternative fuels? Are you shocked that the most complained about car brand is the most popular new car to buy? Let us know in the comments below.