Car prices fall but slowdown expected, says survey

The latest figures released by the Alliance & Leicester Car Price Index, produced in association with What Car?, have revealed that the price of new cars continued to tumble in July 2003, with a year-on-year fall of 1.5%, the largest year-on-year fall since March.

Today’s prices are "attracting massive numbers of buyers" but it is believed that there will be slowdown in sales toward the end of the year. However, to date car sales have outstripped those of 2002, a year in which nearly 2.5 million new cars were sold – the highest volume of new car sales on record. Just over 1.5 million new cars have been sold so far this year and dealers expect sales to be boosted next week by the 1 September plate change.

Superminis have become the highest volume-selling category of car in the UK and prices have plummeted since the index began, dropping 12.7% since June 1998 and by 3.5% since June 2002, according to the report.

A slight slowdown in sales is predicted before the end of the year, as UK consumers are heavily indebted and any potential rise in the cost of borrowing could hit consumer spending hard, the report found.

Andy Bayes, Head of Motor Finance at Alliance & Leicester, said: “Consumer spending has been relatively strong recently and car sales have boomed as a result. Dealers will have to decide over the coming months where their priorities lie, and whether they will cut prices to meet targets or increase their margins. We are expecting further price falls on the horizon.”

(gmcg)