Demand for new cars falls as Brits turn to second hand market

As 56 plate cars hit forecourts across the UK this week, new figures from AA Personal Loans reveal that public demand for new cars is falling as savvy Brits opt for second hand deals on wheels.

After a month when homeowners have been left reeling by a series of living cost hikes – including surprise rises in gas and electricity prices and bigger mortgage payments, following the recent Base Rate rise – the AA figures suggest that car manufactures face a quiet September.

Rather than simply looking at historic trends on forecourt sales, the quarterly car buying index form AA Personal Loans offers a forward looking picture of demand for cars in the UK. The research tracks the car buying intentions of more than 12,000 people over a 12-month period, assessing when people plan to change car, which type of car they are after and the reasons behind the purchase.

Car demand: Summer 2006 highlights

Demand for car purchase remains unchanged from spring 2006 – with one in five adults (20 per cent) planning to change car in the next 12-months.
For those predicting that the new 56 plates will trigger a frantic month of car buying, AA Personal Loans research reveals that only 5% of people plan to change car within the next two months.
Despite overall demand for cars remaining flat at 20 per cent, there is a notable shift in the balance between new and used cars. Looking at those planning to buy a car, the proportion of car buyers going for a ‘nearly new’ second hand model (less than three years old) has risen from 40% to 45% in the last three months, whereas demand for new cars is down from 30% to 26%. With new registration cars coming to market in September, a seasonal uplift to the 30% figure would have been expected.
The Popularity of nearly new second hand cars is as prevalent among men as women (demand up 5% among men to 42%: Up 5% among women to 49%). The male market for new cars has fallen from 34% to 28%.
The traditional target audience for new motors – 30-49 year olds - is now leading the charge in the nearly new market (49%); whereas it is the over 50s now propping up the new car market (32%). Car buyers in the affluent South East are those least likely to be planning to buy a new car in the next 12-months (21%).

Reasons behind car purchase

The picture of car buyers tightening their belts and expecting their money to go further was confirmed when AA Personal Loans asked car buyers what the key drivers behind their planned car purchase were.

At a time when car manufacturers are incentivising new car buyers with imagery of sleek performance, sex appeal and special deals on added features, the AA Personal Loans study reveals that these are all factors that fail to impress car buyers. Of those planning to change car in the next year, only 11% wanted a faster or more powerful car; less than one in ten (9%) was interested in ‘add-ons' and gadgets - and a mere 6% wanted a sportier car with more street cred or sex appeal.
In contrast, most car buyers were most bothered about simple ways to save money. The most important factor behind choice of car was to pick a reliable car that had a good track record for mechanical reliability and repairs (28%). This was closely followed by finding a car that was economic to run and cheap to insure (27%).
Safety was only a top pull for just over one in ten people (12%). Buying an environmentally-friendly car was a top factor for less than one in five people (17%) – and, perhaps surprising, collated with age. The older the car buyer, the greater the importance placed on buying an environmentally friendly car.

Which car?

The top choice for young people (aged 18-29) is a small family car (35%), closely followed by a super mini.
The family five-door estate is back – almost four-times more popular than the flexi-seating people carriers (18% vs. 5%).
Chelsea tractors are a woman’s thing – women have overtaken men when it comes to demand for these gas-guzzling off-roaders.
More than one in six car buyers (16%) is yet to decide on their next dream car but think they’ll know it when they see it. If this group want to optimise the resale value of their next car, they may wish to balance car reviews with a touch of colour psychology. AA summer research has revealed that blue has overtaken silver as the new car of choice for UK drivers.

Lloyd East at AA Personal Loans commented: “For many people, their car is second only to their home as the most expensive purchase they will make. Our tracking study of people’s car buying plans offers a useful snapshot on future demand in the market and this in itself contributes to a broader understanding of consumer confidence.”

“Our summer research shows that demand for cars remains at a steady level, although an increasing proportion of the car buying market is looking for a second hand model. During a summer when millions of Brits have materially felt the pinch from the real, everyday costs of running a home, it is not at all surprising that people want to get the most of their money when it comes to car purchase. In addition to being savvy in finding a car, people also need to think about how they finance their car. It’s a false economy to get a car for a good price only to then buy it with expensive car finance.”