Bumper car sales could prove short-lived

March was a record month for Britain's new car market, industry figures have revealed, but sweeping tax changes are likely to lead to a bumpy road ahead.

The Ford Fiesta was the best-seller in March. Picture: Contributed

Just over 562,300 new cars were registered last month, the Society of Motor Manufacturers and Traders (SMMT) said today – up 8.4 per cent compared with a year earlier and the largest monthly total on record.

However, experts said the splurge in March – traditionally a busy month with a change of plate – could be short-lived.

New vehicle excise duty (VED) rates came into force at the start of April which mean all new cars, except for those with zero emissions, are subject to an annual flat rate charge. There is also an additional “luxury” tax on cars with a list price of over £40,000.

RAC research found the vast majority of drivers buying new cars will pay significantly more following the changes, even on hybrid vehicles that previously attracted a zero rate.

Howard Archer, chief UK and European economist at forecasting consultancy IHS Global Insight, described the latest sales figures as “highly impressive” but warned there may have been “an element of a last hurrah” in the record performance.

“There was clearly a considerable lift to sales coming from both consumers and businesses bringing forward car purchases before changes to VED were introduced in April,” he noted.

“It also looks odds-on that the squeeze on consumers’ purchasing power will deepen appreciably further while businesses will face increasingly challenging and uncertain conditions which may well cause them to be more circumspect in replacing their car fleets.”

Paul Kaye, sales and marketing director at Close Brothers Motor Finance, said: “Despite growth picking back up, rising inflation and the impact on consumer spending could produce headwinds on new car growth and we are already seeing changes in consumer buying patterns.”

SMMT chief executive Mike Hawes remained relatively upbeat, saying: “This bumper performance probably means we will see a slowdown in April, exacerbated by the fact there are fewer selling days this year given Easter timing.

“Looking ahead to the rest of the year, we still expect the market to cool only slightly given broader political uncertainties as there are still attractive deals on offer.”

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