New car sales accelerate past 1.5m

“The UK’s performance in the context of Europe is particularly impressive, with growth consistently ahead of the rest of the EU for the past two years,” said Mike Hawes, SMMT chief executive.

“As the UK market starts to find its natural level, we expect to see the growth level off during coming months.”

“The UK’s performance in the context of Europe is particularly impressive, with growth consistently ahead of the rest of the EU for the past two years. As the UK market starts to find its natural level, we expect to see the growth level off during coming months.”

The sustained rise in car sales has been anecdotally put down to consumers funding the purchases with compensation payouts from PPI mis-selling, though senior industry sources discount this, preferring to attribute it to historically low interest rates, new forms of auto finance and the rising price of fuel meaning motorists are looking for less ‘thirsty’ modern vehicles.

David Raistrick, UK automotive leader at Deloitte said: “The UK new car market is enjoying its 30th consecutive month of comparative growth, supported by historically low finance offers available to consumers as the Bank of England’s base rate remains at 0.5pc.”

He added that in Europe major manufacturers are likely to continue to focus their efforts on the strong UK car market as Europe continues to under perform as a result of continuing finance worries there.

“With the possibility of deflation looming in the Eurozone, this could potentially lead to the recovery in some European markets being slowed further, as consumers delay making purchases in the expectation of price reductions,” Mr Raistrick said. “This would suggest that we will continue to see production being directed to the UK where consumers are showing confidence to enter the market.”

One of the biggest challenges to the continuing strong run in Britain is cars that are just a couple of years old being sold on as their buyers update or upgrade.

“Aside from a potential interest rate rise, the biggest challenge facing the automotive retail sector will be the impact of the increasing numbers of nearly new used vehicles returning to the market. This could detrimentally affect residual values with the knock-on effect that the used vehicle purchase becomes a more competitive proposition. New cars remain exceptionally good value as a result of manufacturer incentives and the historically low finance rates.”

The strength of August’s figures hinted that September could be a bumper month for the industry said James Hind, the founder car buying website carwow.co.uk.

“This is great news for the industry and the economy,” he said. “What’s surprising is that August is typically one of the quietest months for new car registrations, so it’s a good indication that September, one of the busiest months, will see another big increase.

“The automotive industry is clearly benefiting from more people being in employment and increasing consumer confidence. Many people are realising the benefits of buying a brand new car over a used vehicle, as new cars often end up cheaper in the long run, largely due to the cheap finance rates currently being offered by manufacturers.”

However Howard Archer, chief UK and European economist at IHS Global Insight, said that if wages continue to grow at the low rates seen for the past few years, then this, combined with a possible interest rate rise, could see buyers less likely to frequent dealerships.

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