New car sales in UK still growing - up 14.8% April 2013. Driven by PPI Claims?

The SMMT shows the UK is yet again reporting new cars sales growing strongly, with registrations UP by 14.8 per cent in April 2013.

It is quite hard to fathom just how UK new car sales (well, registrations) continue to rise inexorably against a backdrop of otherwise stagnant economic activity, but they do.

April 2013 has seen a total of 163,357 new car registrations, up a huge 14.8 per cent on April 2012 and the best figure since 2008, and these sales figures are not being driven by fleet buyers but by private motorists – private sector registrations grew by 32.3 per cent in April and are up by 15.2 per cent year to date.

Not surprisingly, it’s the Superminis that are performing strongly – although all sectors are showing a rise – and it’s the Ford Fiesta that continues to be the best seller in the UK with sales of over 8,000 in April and over 42,000 so far in 2013, and the rise of superminis has also seen an increase in sales of petrol-engined cars thanks to the wave of small capacity, frugal petrol options.

But what is driving the sales of new cars to the private sector, despite the general economic gloom?

There’s little doubt that private buyers are looking at the bigger picture when buying a new car and can see that although investing in a new car is a significant purchase, heavy discounts, cheap finance and lower running costs all conspire to make a new car often a cheaper option than persevering with an older, thirstier and less reliable car.

But one big factor in play is the huge injection of often sizeable lump sums in to consumers’ bank accounts with the ongoing PPI claims in the UK, which have totalled £9 billion in the last two years. The average PPI payout is around £3,000 (although many claims have been for much bigger sums), which isn’t enough to extend your house or pay off your mortgage, but is enough for a chunk down on a new car, especially when you convince yourself that you will actually end up saving money.

The real question is, will the economy have improved enough by the time the PPI gravy train grinds to a halt to keep new car sales growing?