Sales of new cars in Northern Ireland jumped last month as supply chain issues eased, according to latest official figures.
A total of 2,973 new cars were registered in the province during November, nearly an 18% jump on the same time last year and in line with a hike in the three other UK countries.
However, while the improvement will come as a relief to car retailers, the outlook for the market is likely to be tempered by the growing cost-of-living crisis and shaky consumer confidence in light of a potential UK recession.
Richard Ramsey, chief economist at Ulster Bank said the increase itself is marginal given the sector had been hampered by supply chain disruption last year. He said November’s sales were up on 2020 and 2021 but still 6% below pre pandemic levels, while this year’s total marked the weakest November in a decade.
He said the pandemic and the Ukraine-Russian war have put paid to the new car sales as a barometer of consumer confidence.
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“The latest month’s new car sales are, in many cases, a reflection of consumer demand and confidence prevailing in the summer of 2021,” he said. “The reality of consumer confidence today is severely dampened by the omnipresent cost-of-living crisis and higher interest rates.”
With global recession now increasingly likely, demand for new cars is expected to wane, with potential buyers having to hold on to their current models, opt for second hand or downsize to smaller and cheaper models.
Mr Ramsey said new car prices in the UK have increased by 6.9% in the year to October 2022 while the huge increase in popularity in car leasing and other pay monthly forms of funding have also risen as a result of increased interest rates.
“Motorists, like homeowners rolling off relatively cheap fixed-rate mortgages, will discover that renewing their PCP (personal contract purchasing) deals will be much more expensive than before,” he said. “Downsizing for a ‘lesser’ vehicle or switching to a second-hand car will be the undesirable choice facing many motorists.”
He said such a move occurred following the financial crisis in 2008, with manufacturers providing models to fit tightened budgets.
“We may see a similar development during this cost-of-living crisis, particularly in relation to smaller electric vehicles,” he said. “However, whilst cheaper to run these are much more expensive to buy.
“And, there isn’t the low interest rate environment that supported motorists through the previous and more modest cost-of-living crisis relative to the current model.”
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