UK car sales reach four-year high

The SMMT's Paul Everitt says that lower running costs of new vehicles have attracted people to buy

UK new car registrations rose 5.3% in 2012 to 2.04 million - the highest level since 2008, according to the SMMT car industry body.

Ford's Fiesta and Focus, and Vauxhall's Corsa and Astra were the four best-selling models.

The Volkswagen Golf came fifth, with the Nissan Qashqai in sixth place.

"Looking ahead to 2013, we anticipate the market will hold firm," said the chief executive of the SMMT, Paul Everitt.

Others were less sure.

"As we look to the year ahead, the real question is whether this demand will hold," said Richard Lowe from Barclays.

"Consumer pockets will continue to be squeezed," he said, before adding that "manufacturers and dealers will have to be careful that supply does not outstrip demand".

'Offers and incentives'

Last year's growth rate was the fastest in 11 years, bolstered by a 106,346 or a 12.9% rise in demand from private individuals, who bought about 929,000 of the 2,044,609 units sold.

Analysis

UK car registrations rose last year in a climate of deep discounting by carmakers.

Sales have fallen sharply across the rest of Europe, where the eurozone crisis and economic austerity have caused a great deal of uncertainty, so supply has exceeded demand.

The new car discounts coincided with a shortage of used cars following years of weak sales. This pushed up prices and resulted in the price gap between new and used cars narrowing.

In addition, older cars often cost more to run, insure and tax because they tend to have larger, thirstier and more powerful engines that emit more harmful gases. As a result, many buyers now feel new cars offer good value for money.

The overall rise in registrations was the second annual increase since the start of the downturn in 2008, though the market remained 14.9% below its pre-recession peak in 2007, when 2.4 million cars were sold.

In December, 123,557 cars were registered, 3.7% more than in December 2011.

"December's figures wrapped up a positive year for the industry, which saw consumer demand driving sales," said Mr Lowe.

In a statement, SMMT said: "Offers and incentives and some buyers shifting from buying used to new cars could have contributed to the upturn."

Rising prices for second-hand cars, which are scarce following years of weak sales, could also have contributed to a shift in buying patterns.

"This stock shortage is a long term issue and is unlikely to change until new car volumes pick up significantly and the economy improves enough to generate a bigger churn of vehicles in the marketplace," according to British Car Auction's communications director Tony Gannon.

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