Despite a weaker economy and two record years in 2001 and 2002, the market for new cars is still strong. Fleet sales usually drive the market on, but this month private sales led the way. The UK market is now one of the cheapest in Europe, offering attractive deals to the individual customer.

New car registrations increased by 15.8% in the UK for the month of June compared to a year ago. Just over 240,000 cars were sold over the period and nearly 63,000 of these were diesel-powered. Nearly half of the total sales went to private-buyers.

The Ford Focus remains the biggest seller, for the 38th month in a row, but the new Renault Megane has had a big impact, taking second place. The high proportion of private sales has led to an increase in niche vehicles such as 4x4s and MPVs, which are less likely to be used as fleet vehicles.

In a year that was expected to witness a slowdown in sales, the first-half performance has been strong with the market now expected to total 2.45 million units in 2003. This would make it the third highest year of car sales by volume on record, after 2002 and 2001. Part of the performance increase is attributable to three extra trading days in June this year over last year, which included the Golden Jubilee celebrations.

Continuing competition in the new car market place is squeezing prices ever lower. This, coupled with a falling pound against the euro, is making new cars more affordable and leaves the UK market looking much better value against other European markets than in the past.

New car sales will probably continue to be strong as consumers take advantage of the UK’s newly found position as one of the cheaper countries in Europe. However, companies should be careful not to follow the same trend of discounting as seen in the US, which saw profit margins damaged.

All of this is bad news for importers as their advantage on price shrinks and the proposition of a new car from a traditional dealer becomes more attractive and affordable. The used car market could also struggle as residual values are forced down.

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