Car buyers desert the showrooms

The credit crisis skidded out of the finance sector and careered into the real economy last month, leaving September's new car sales figures something of a mangled wreck.

With the new "58" registration plate, September should have been a bumper month for the garage trade. Instead, private car sales slid by 23 per cent compared with September 2007, as a collapse in consumer confidence and a squeeze on bank lending saw buyers postpone the purchase of new vehicles.

As the ultimate "large ticket" consumer durable, and with most purchases made out of choice rather than necessity, the motor trade is peculiarly vulnerable to a consumer slowdown. Fleet sales fared slightly better, leaving the overall car market down 21 per cent, and 7 per cent lower in the year to date.

The Society of Motor Manufacturers and Traders, who released the data, estimate that full year sales in 2008 will be 2.26 million, the lowest since 2000, and 2.5 per cent down on last year.

Industry rumours suggested that the numbers might have been even worse were it not for the manufacturers "pre-registering" cars themselves, and had the car makers not started to offer their own finance deals as an alternative to hard-to-find bank loans.

Paul Everitt, the SMMT's chief executive, said: "Government action is now needed to restore consumer confidence and boost demand in the real economy. The Chancellor's pre-Budget report should set out a package of measures to boost demand for new fuel-efficient cars and scrap plans for unfair increases in car tax."

As with other areas of retailing, buyers are opting more often for value and economy. The only segment of the market to show an increase in sales was small city cars, up by 22.9 per cent on last September. By contrast, and reflecting high fuel costs and changes in social acceptability and fashion, SUV sales were down by 42.4 per cent. Luxury saloons were the hardest hit category, with a 43.3 per cent deceleration.

Land Rover and Jeep were two notable casualties, as was Porsche, which now makes a large SUV alongside its traditional sports cars. Bentley, Lexus, Alfa Romeo and BMW also fell.

By contrast, the tiny Smart car enjoyed an excellent month, with sales up almost 10 per cent on last September and 78 per cent better in the year to date. Kia, Hyundai and Fiat did better than average, helped by new models and a more value for money showroom proposition. Jaguar's well-received new XF saloon helped the British marque buck the 10 per cent fall in sales of executive saloons, while Audi extended its long-term drive for sales in the UK.

The generally disappointing sales and the turmoil in financial markets confirmed economists in their view that the Bank of England may well cut interest rates by as much at 0.5 percentage points when the Monetary Policy Committee meets this Thursday. Howard Archer, UK Economist at Global Insight commented: "The extreme weakness of car sales heightens the rapidly growing concern over the economy and boosts the case for the Bank of England to cut interest rates to 4.50 per cent."