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Need A New Car – Take Action Now!

Thursday, 19. February 2009

We are entering a very strange period at the moment in the motor industry. Many manufacturers have reduced production of new cars. Some have stopped altogether for up to 4 months. This drop in production is the result of a corresponding drop in demand (sales of new cars have dropped by 30 – 40% over the last few months). So could it be that consumers and businesses are switching from new to used cars? If that was the case used car dealers would be raking it in at the moment and auction prices would be high, but neither is the case so could it be that drivers are holding on to their cars longer? Leasing companies have confirmed that they are. They have recently reported a large increase in contract extensions whilst clients assess the market, waiting for the great deals to come along. But with reduced production the great deals simply aren’t out there at the moment. The belief that there are fields of unsold new cars sitting around is simply not fact. Yes there are a couple of manufacturers that have stock of unsold cars but you will probably find that this is always the case as they sell to clients that insist on large batches of cars being available for instant delivery. Or the dealers require a reasonable level of stock to be available on demand. The problem with this situation is that the equation is now out of kilter. Production has dropped to meet the immediate demand for new cars so when the pent up demand returns to the market there will be no cars available resulting in no deals. Prices and lease rates will in fact increase which will increase inflation. Some people will have no choice but to switch to used cars but the supply of newer used cars would have also dried up as a result of people holding on to their cars for longer so the cost of used cars will increase adding to inflation. Of course this will eventually settle down and we will return to the status quo but in the meantime, if you are looking to change your car and you see a good deal, whether it is on a new or used car, you should take it immediately. If you take a car now, by the time your new car is due to be changed next we will hopefully be out the other side of the recession and car prices and lease rates will have stabilised with the return of some bargains. By Graham Hill