New car sales down by 19%

NEW CAR sales this month are not expected to be as strong as initially hoped, due in large part to the economic downturn, writes Michael McAleer.

Sales estimates for the first six months show the new car market was down almost 19 per cent. June sales alone were down 48 per cent from 15,399 last year, to just 7,932 last month. Overall, sales for the first six months were down 18.8 per cent to 124,146 from 152,938 new cars over the same period last year.

According to several distributors, the impact of low consumer confidence in the economy is being felt at dealerships. Even with an estimated 80 per cent of models falling in price due to the new emissions-based tax regime introduced yesterday, new car sales for the year are still expected to fall by up to 35,000 car sales on last year, ending the year at about 155,000.

Part of the fall-off in the past two months is due to people waiting to benefit from the new tax regime, along with delays in some manufacturers publishing their new price lists.

However, even taking these factors into account, July sales are not expected to be strong enough to recoup the fall in sales over the first six months. According to Eddie Murphy, chief executive of Ford Ireland: "At this stage, I'd settle for any bit of growth year on year from July. At one point, I was expecting a significant increment from this month, but I'd be surprised if it happens now."

David Shannon of Toyota Ireland said his best estimate for July would be that the market would be slightly down on the same month last year.

There is also growing concern in the industry over the number of used cars held by dealers across the State. These cars are depreciating in value on the forecourts, and as a result dealers are more reluctant to offer attractive prices for trade-ins.

Anecdotal evidence suggests customers hoping to benefit from the new tax regime are finding the benefits of a price reduction on their new car being offset by a poor trade-in price for their old one.

In turn, some are opting to sell their cars privately, but the high number of used cars on the market is impacting on this market as well.

A recent SIMI survey found that used-car prices on forecourts have fallen by 11 per cent for diesel cars and 15 per cent for petrol models. These falls are then mirrored in the trade-in prices being offered. It is in the used-car market that dealers often make their profit, as new cars carry relatively small profit margins.

Therefore a fall in used-car prices and an abundance of stock - often financed through bank credit - is having a detrimental effect on dealer profits. "Certainly the banks and finance houses are tightening their finance facilities for overdrafts and are becoming more stringent on customer finance deals," says Murphy. "That's undoubtedly impacting on dealers."

There are also concerns that the high levels of used cars on forecourts will be exacerbated when new cars sold to hire companies for their summer trade are returned to market in autumn.

The hire market was responsible for 16,055 new registrations up to the end of June, and that's likely to increase in the coming weeks. It's an important outlet for several mainstream brands, making up 30 per cent of all Fiat registrations to the end of May, 23 per cent of Chevrolet and Kia sales, and 22 per cent of Opel and Nissan sales.

For customers it means good news for cash buyers; either first-time buyers or those who have already sold their car privately and secured finance on a new one. Good-value deals are now available, in particular on used cars and on low emissions cars that will cost less under the new Vehicle Registration Tax (VRT) and road tax scheme.

The new CO2 emissions-based tax regime replaces the old system of taxing cars based on engine size. Now there is a seven-band system where rates range from 14 per cent to 36 per cent, depending on a car's CO2 emissions. These will be clearly labelled on new cars.

From yesterday, imported cars will face VRT charges based on their carbon emissions.

However, when it comes to road tax, imported cars initially registered in their country of origin prior to January 1st will operate under the old system based on engine size. Imported cars initially registered in their home country after January 1st will have road tax applied under the new system.