More new cars but warning issued amid fear of car finance bubble

New car registrations for March rose by 14% (21,597) when compared with the same month last year, according to official statistics from the Society of the Irish Motor Industry (SIMI).

More new cars but warning issued amid fear of car finance bubble

At 82,882, total new car registrations for the year to date are 28% ahead of the same period last year (64,519). The top-selling make this year is Toyota, followed by Hyundai, Volkswagen, Ford, and Nissan.

Sales of light commercial vehicles were up 21% (3,435) compared to March 2015, with registrations up 34% (13,461) for the first three months of the year.

Figures for heavy goods vehicles show March registrations (312) rose 29% compared to the same month last year (241) and are up 63% in the year to date.

SIMI director general Alan Nolan said: “The increase in new car sales has continued for the month of March. While the stats show a lower percentage increase for the month, it is important to put this into context, as the sales period for March 2016 had two trading days less than in 2015, with Easter having fallen in April last year.

“Even with this, the increase in sales across all sectors has continued upwards and it is encouraging to see consumers and businesses investing in their vehicles again.”

While the increase in sales has been broadly welcomed, car history experts Motorcheck.ie yesterday warned that, with one third of all cars sold on hire purchase style finance deals such as the popular personal contract plan (PCP), there is a fear that we could be creating a “car finance bubble” that cannot be sustained.

Michael Rochford, the managing director of Motorcheck.ie, said: “The continuing rise in new car sales is great news for the motor trade and the economy in general.

“But we should be aware that prices in the used car market have risen in recent years due to the stock shortages created by the downturn. This has kept residual values high and made finance deals such as PCP more affordable. But the growth of PCP means a glut of relatively young used cars will hit the market when those three-year deals expire. It is very likely that the used car market will begin to see values start to slide over the coming years as a result of supply pressures being eased.”

The effects of this could be felt by the consumer as well as the car manufacturer or banks. “The consequence for the consumer is that their next PCP may not be as affordable due to reduced residual values,” he said.

Mr Rochford advised consumers to be aware they won’t own the car at the end of the PCP term and to plan in advance. “Make sure you have access to the funds to either buy out or refinance the car at the end of its PCP term, or alternatively make sure you save for a deposit on a new PCP as you won’t own a car to trade in when you are going for your second PCP.”

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