HPI and Car Dealer survey reveals 86% unmotivated to buy in 2009
Leading vehicle information organisation, HPI, in association with Car Dealer Magazine, reveals that 41% of new car buyers say the cut in VAT is ‘unlikely’ to make them buy in 2009. The figures suggest that the government’s 2.5% VAT cut has failed to get Britain spending, especially as the reduction has the greatest impact on big-ticket items such as cars.
Daniel Burgess, Automotive Director at HPI comments says: “Confirming our worst fears, measures to incentivise buyers to the new market are failing. In total, a staggering 86% of those we surveyed reported that the VAT cut had not motivated them to consider a new car purchase, adding to the intense pressure already faced by the motor industry. In fact, consumers are more likely to be wooed by the many special offers and promotions car dealers are running in a bid to boost business.”
Motor industry expert and editor of Car Dealer, James Baggott adds: “Less than 15% of new car buyers surveyed said they would be more likely to buy a new car following the VAT cut. A staggering 36% said they would ‘definitely not’ buy a new car, despite the reduction, with 10% saying it was ‘very unlikely’. They could save £500 on a £20,000 car and £1,250 on a £50,000 vehicle, but it’s clear from our survey that the savings are just not swaying them to spend.”
An extremely quiet November was followed by a boost in sales in December, but this consumer spending spree seems to have burnt out. With so little savings to be made, anyone struggling to afford a new car is unlikely to take the bait. In addition, finance is still unavailable to many and ongoing economic uncertainty makes big purchases out of the question.
From a dealer perspective, many have complained that the biggest effect of the VAT reduction is the extra expense and administration burden of producing new brochures and prices lists, as well as reduced operating margins in some areas of the business. Says James Baggott “Some dealers have even had to pay expensive software engineers to reprogram computer systems, hitting revenue margins still further.”
Concluding on a more positive note for both the dealer and the consumer, Daniel Burgess says: “In the used car arena we have seen falling values on higher ticket cars for many months now, and those consumers who are currently in a comfortable finance position are making the most of buying fantastic cars at fantastic prices. However, we are already beginning to see a shortage of nearly new, low mileage cars on forecourts and this will only intensify over the coming months.”