Rising interest rates dampen new car sales

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The Independent Online

The number of new car registrations fell 7.1 per cent in December as rising interest rates discouraged buyers from splashing out.

New registrations fell to 144,353 last month, while sales over the year fell 0.5 per cent to 2.57 million vehicles, the Society of Motor Manufacturers and Traders (SMMT) said. Christopher Macgowan, the chief executive of SMMT, said the figures still showed strong sales in the UK. "Last year was only the third on record where new car registrations broke the 2.5 million barrier. However, despite strong first-quarter demand and growth in November, we missed taking the run of consecutive record years to four by just 11,781 units," he said.

The SMMT has cut its forecasts for Britain's car sales this year and new car sales are expected to fall 2.6 per cent to 2.4 million vehicles in 2006, in the face of higher interest rates and a slowing economy. "In the context of the past 10 years, this remains a robust forecast. Nevertheless, our expectations point to a slightly weaker market than in recent years, a reflection that the automotive industry is not immune to the competitive pressures affecting other sectors," Mr Macgowan said.

The Bank of England has raised interest rates five times since November 2003, pinching consumer spending capability. In August, the SMMT cut its estimate for 2004 sales.