A new study shows that car buyers face a dilemma: With inflation reaching a record 40-year-high, they are forced to put off buying, cut back on their spending, and look at more affordable options.
What Car? One-third of those who have replaced their cars recently surveyed by A What Car?
Nearly half of respondents have delayed placing an order for more than three months. A quarter stated that they would wait to 2023 in case the financial squeeze eases.
A new study reveals that car buyers are having to defer their purchases due to rising costs of living. Inflation at its highest level in 40 years has led to an increase in the cost-of life crisis.
Within days, the results of the survey had been published. They confirmed that UK inflation reached a record 40-year high.
CPI rates rose to 9.4 per cent, an increase of 9.1 percentage in the month before.
The Bank of England hinted at an increase in interest rates of 0.5 percent to 1.75 percent next month as a way to alleviate the pressure on households.
CPI rates are expected to reach around 11% in the fall, as the energy bill cap is set to increase again.
Editor of What Car? Steve Huntingford said that this would have serious ramifications on the industry. Its research shows that many car buyers will delay buying in the interim.
He stated that rising inflation was having serious implications for the automobile sector.
“Our research shows that many buyers are currently reviewing their spending habits, cutting back on vehicle purchases, considering other models, or looking at different options to offset rising living expenses.
The research also found that 40 per cent of buyers have changed either the make or model they’re considering due to the cost of living crisis.
72% of people are looking at a completely different model. Most have turned to cheaper options.
Over a third (35%%) of car buyers told What Car? that the crisis has impacted their willingness to spend. They are cutting back on their spending for the next vehicle.
When asked how much they’ll lower their spending by, over one in five (23 per cent) said by at least a fifth, while another quarter of the poll estimated they will spend between 10 and 15 per cent less than they had originally planned.
Some people felt that recent price-of-living pressures had so negatively impacted their financial situation, they’re now considering buying a used car instead of a new vehicle.
Some 21% stated that they had switched to the second hand market because of financial difficulties.
Auto Trader said the average second-hand car last month was £17,252 compared to £12,798 in June 2019. It said that while used car values have stabilized, they will not fall.
That said, these drivers are unlikely to be able to make significant savings by entering the used market, with second-hand prices still £4,500 higher than pre-pandemic due to decline in new vehicle manufacturing and a shortage of zero-mile motors.
Auto Trader recently told This is Money that the average used car price last month was £17,262 – up from £12,798 in June 2019 – and while values are showing signs of stabilising there is ‘no sign’ of prices falling any time soon.
What Car? We also asked people who bought cars to share their opinions. There were 401 participants.
Lisa Watson, director of sales at Close Brothers Motor Finance, said ongoing supply chain issues are causing more problems for the car industry than last year’s lockdowns and it is understandable that buyers are looking to delay purchases.
‘It’s completely understandable that buyers are unwilling to place orders for vehicles with no firm idea of delivery dates, but it’s disappointing that so many have lost confidence with what should be an exciting process of choosing a new car,’ she said.
“The sector is trying to reduce lead time.
‘Our research shows dealers should work with buyers to understand where compromises can be made to get more cars on customers’ driveways as soon as possible.
‘If the supply chain crisis wasn’t enough, the industry is also starting to see the impact of cost-of-living pressures and record high fuel costs.
“Prospective buyers who might already be concerned by delays in delivery will consider their purchase even more closely over the coming months.”