Private new car buyers head back to showrooms in October

The new car market continued to surprise with its strength. The October 2007 volume was on par with the 1999-2006 average for October of 166,429 units, but almost 10 per cent above expectations for the 2007 market, according to the Society of Motor Manufacturers & Traders (SMMT).

A slowdown had been expected, in light of concerns over the economic setting. Confidence appears robust with consumers keen to take advantage of new car deals, despite fears in the banking sector over credit levels and the price of fuel.

Market to grow to 2.375mn units in 2007

October's rate of growth was the best since December 2005. It pushed the market up 2.5 per cent or 51,573 units over the year-to-date. Almost a quarter of this growth took place in October.

The 12 month rolling total currently stands at 2.396mn units, over 20,000 units ahead of the recently revised full year forecast of 2.375mn units.

However, concerns remain that the market will cool in the future, as the rate of economic growth eases and if the banking crisis gathers pace.

Growth across all sales types

Encouragingly all three sales types continued to post growth in October and all three showed volume growth over the year-to-date.

The strongest growth has been recorded in the fleet/business sector and collectively their market share has risen by half a percentage point over the year-to-date to 55.9 per cent.

The private sector's growth is particularly positive as this sector of the market was expected to dip.

Vauxhall Astra top in October

Vauxhall's Astra took the best seller slot in October for the third time in five months. Ford's Focus slipped from the top slot for a third successive month, but remains the best seller over the year-to-date.

Most segments recorded strong growth in October, especially the MPV segment - up 2,666 units.

Supermini volumes also did well - up three per cent, or 19,813 units, over the year-to-date.

Diesel penetration at second highest level ever

Diesel-powered cars took a 44.1 per cent share of the October market, up from 41.7 per cent a year ago. This was their best performance bar December 2005, when regulatory changes pulled forward demand for diesel cars.

Consumers appear keen to improve fuel efficiency and lower their carbon footprint by switching to diesel models. Diesel penetration is forecast to pass 40 per cent over the full year, for the first time.

Economic analysis

On 9 October the Chancellor raised the GDP growth forecast for the UK this year to three per cent. However, he lowered the outlook for 2008, suggesting that growth of 2-2.5 per cent was likely. Independent forecasters expect growth to be at the lower end of this range.

This slowdown is expected to be focused in consumer spending and with it lower new car demand.

At the same time costs are rising, with particular concerns over the recent increases in oil prices – which are approaching $100pb. This could curtail room to cut base rates at a time when the economy needs a stimulus.

'After a strong September, one of the key months for car buying, we are pleased, if a little surprised, that the growth has continued into October,' said Christopher Macgowan, SMMT chief executive. 'After interest rate rises, and the ongoing concerns within the banking sector, we expected private demand to weaken. However, October figures show private buyers are storming back to the showrooms, and SMMT has revised upwards the forecast for 2007 new car registrations. Interestingly, private buyers appear to be choosing smaller, more fuel-efficient cars with the Vauxhall Corsa topping the list in October, and the Ford Fiesta over 2007 so far.'