New car sales plummet to 1966 levels

Car dealership

Sales of new cars have plummeted to the lowest levels seen since 1966, as the credit crunch and economic downturn keep drivers away from the showrooms.

According to the Society of Motor Manufacturers and Traders (SMMT), only 63,335 new cars were bought in August, an annual decline of 18.6%. Sales to private buyers rather than the fleets were down by a massive 23.6%.

SMMT blames the slowing economy, expensive loans and the rising cost of fuel for putting people off visiting car showrooms.

Luxurious cars have been the hardest hit, with sales of BMWs down by around 40%, Jaguars by 41%, and Land Rovers and Mercedes-Benz down by 35%.

And it appears consumers are becoming increasingly conscious about the efficiency of their vehicles.

The SMMT reports that sales of smaller cars held up better, with the Vauxhall Corsa becoming August’s top seller, and the Mini Cooper and Ford Fiesta increasing their share of the new market over the past 12 months from 30% to 34%.

Although August is a typically slow month for the sale of new cars - as new registrations are not introduced until September - the monthly fall accounts for a quarter of the total decline seen so far this year, and has raised fears that consumers are watching what they spend.

Howard Archer, the chief European and UK economist at Global Insight, says: “Even allowing for the fact that August is typically a quiet month for the car market due to the number plate change in September, this was very worrying.

“Sharply deteriorating car sales is a further clear sign that consumers are increasingly cutting back on their spending. Survey evidence shows that consumers have become markedly more reluctant, or unable, to splash out on big ticket items.”

Archer predicts that consumers will continue to put off big purchases over the coming months.

“Rising utility bills and food prices, higher mortgage repayments, falling house prices, higher debt levels and increasingly rising unemployment are all dampening factors for consumer spending,” he says.

The SMMT now expects new car sales to fall by around 10% this year and has revised its forecasts down to just 2.26 million sales this year and 2.16 million in 2009.

Moneywise’s top tips for financing your new car.