Spend on new cars set to fall

The latest findings from the Sainsbury’s Bank Car Buying Index, which tracks the number of people planning to purchase a car on a six-monthly basis, indicates a decrease in the number of people planning to buy a car, and a drop in their expected spend on any car purchases.

The research indicates that 7.65 million people intend to buy a car between March 2007 and August 2007, a decrease of 430,000 people from the previous index, which covered the period September 2006 to February 2007. The index reveals that £53.2 billion will be spent on purchasing cars within the next six months, £16.2 billion less than the previous six months stated in the previous index.

Steven Baillie, Loans Manager, Sainsbury’s Bank said: “For the first time in two years, we have seen a fall in the total anticipated spend on new cars. Over the past four years since we started the car buying index, we’ve seen occasional dips in planned spend on cars, but this fall by £16.2 billion represents by far the biggest drop we’ve witnessed to date. It is difficult to say exactly what is fuelling the decrease in anticipated spend on new cars and it could be a mixture of factors, including concerns about interest rates and environmental anxieties.

“This latest index also indicates that one in four (26%) people who intend to buy a vehicle over the next six months will finance at least some of their purchase through a loan. Indeed our findings estimate that of the total amount of money that will be spent on buying vehicles, around 15.8% will be financed through personal loans, which equates to around £8.41 billion. Although this represents a 33% drop in the total planned for car purchase loans, it's actually more important than ever for people to shop around due to heightened competition in the market."

The bank’s research also shows that 5.48 million people will be looking to buy a second-hand car, up slightly on the previous six months’ figure of 5.12 million; whilst the 1.83 million people who intend to buy brand new cars is down by more than half a million on the previous six months. Over one and a half million people plan to spend more than £10,000 on a car, while 541,000 say they anticipate spending more than £21,000.

Looking at Britain as a whole, the East Midlands is set to see the biggest rise in the number of people buying a car with an increase of five percentage points on the previous six months. Although the South East continues to be the biggest spenders on new cars, with an anticipated £10.5 billion to be spent, this figure represents a decrease of £8 billion on the previous half-year figure. This is followed by Greater London and Yorkshire/Humberside, where people are expected to spend £8.6 billion and £6.3 billion respectively. Wales, the South West and the West Midlands see the biggest fall in the number of people planning to buy a car with a five percentage point decrease in those regions.