Dramatic drop in car sales after tax change and diesel concerns

CAR SALES have suffered a serious misfire, with a dramatic fall in April. Drivers are reported to have brought forward their purchase of a new car to March, in order to beat the new, inflated Vehicle Excise Duty (VED) road tax rates, meaning April sales to private drivers fell by nearly 30%.

Overall, 152,076 new cars were registered in April, a decline of 19.8%. However, private buyers dropped by 28.4%, business sales fell 21% and the fleet market slowed by 12.3%.

At the same time, diesel-powered cars fell out of favour. Compared to April, 2016, last month saw a 27.3% fall in diesel sales, reducing diesel’s market share from 49.6% to 44.9%. By contrast, sales of petrol cars slowed by just 13.1%.

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“The VED tax changes clearly contributed to a rush of new registrations in March and an inevitable lull in April,” said Shaun Armstrong, managing director, online car finance provider Creditplus.co.uk. “But diesel registrations haven’t fallen off a cliff simply due to this post VED lull.

“Buyers have been spooked by the planned introduction of a toxin tax on diesel cars and the London Mayor Sadiq Khan announcing an additional charge on polluting diesel vehicles entering central London. Theresa May then showed her disdain for diesel by hinting that the Government is considering introducing a scrappage scheme to incentivise drivers to trade in older diesel vehicles.”

“The change to Vehicle Excise Duty in itself doesn’t explain the massive fall in new car registrations”

Graham Hill, of the National Association of Commercial Finance Brokers (NACFB) claimed the drop was not expected to be so sharp.

“While private buyers are without doubt sensitive to things like changes in Vehicle Excise Duty, this in itself doesn’t explain the massive fall in new car registrations,” said Hill. “I suspect a growing tide of adverse press around Personal Contract Purchase (PCP), culminating in the announcement that the FCA is to investigate potential mis-selling of vehicle finance, may also have been a contributing factor.”

Last week, experts warned that Britain’s reliance on debt to fund car purchases could lead to mass defaults and repossessions in an economic downturn.

Mike Hawes, SMMT Chief Executive, said April was always going to be much slower. “It’s important to note that the market remains at record levels as customers still see many benefits in purchasing a new car. We therefore expect demand to stabilise over the year as the turbulence created by these tax changes decreases.”

The top three best-selling cars to date this year are the Ford Fiesta, Ford Focus and Vauxhall Corsa.

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