As credit crunch worsens, car market will change

As the latest Regional Planning Report from Experian forecasts a further downturn in house prices and an increase in unemployment for the first time since 1992, the UK could start seeing a change in demand for 4x4s.

Despite rising interest rates, growing debt and environmental concerns over the last few years, larger engine cars, such as 4x4s, MPVs and sports cars, have managed to retain their popularity and have continued to grow in sales. However, with a squeeze on consumer spending, this trend is likely to change quickly and dealers need to prepare in advance, according to Experian.

The latest Regional Planning Report from Experian has highlighted a significantly faster downturn in the house market over the last six months and has forecast a decline in UK house prices of 7.6 per cent over the next two years. The report has also forecast UK GDP growth to slowdown to 1.8 per cent in 2008 and further still to1.5 per cent in 2009, affecting the level of job creation in the UK.

Kirk Fletcher, Managing Director of Experian's Automotive division, said: "A car is arguably the second biggest purchase a consumer will make and financial concerns were already affecting used car sales, which have been falling since 2005. More and more consumers have been delaying their car purchase decisions. However, we have still seen pockets of growth in the 4x4, MPV and sports car segments. Sales do not appear to have been slowed down by financial worries or environmental concerns. In fact, our analysis shows that the effect has been a growing demand for diesel versions of these cars.

"However, while sales are still strong in these segments, they are not as strong as in previous years. The introduction of higher tax on these vehicles and the consequences of the global credit crunch, highlighted in the latest Regional Planning Report, could finally be the factors that push these segments back.

"There will still be pockets of growth in the market, but these will change and evolve and our statistics show that one indication of this is the widespread switch from petrol to diesel cars. In the coming years, the least polluting cars are likely to become the top sellers.

"The challenge for dealers is to watch the trends, identify areas of growth and recognise what motivates different kinds of customers. The breadth and depth of knowledge that Experian provides to dealers enables them to make informed decisions to grow and protect their businesses by targeting the right customers, with the right products, at the right time. This combination of product investment and innovation provides our clients with the fastest route to identifying their most profitable customers."