Rising living costs hit car sales

Small cars and diesel registrations are doing well despite the downturn

Rising fuel bills and living expenses have put the brakes on demand for new cars, a UK motor trade body has said.

The Society of Motor Manufacturers and Traders (SMMT) said UK new car sales fell by 6.1% in June, compared with the same month in 2007.

Overall car sales in the year to the end of June were 1,247,479, down 1.6% on the previous 12 month period.

Diesel car sales bucked the trend, with registrations up 4.5% to take diesel's share of the market to more than 40%.

'Rising pressures'

The SMMT blamed the decline in total sales on a tougher economic environment.

"We are now seeing concerns about rising fuel bills and household costs dampening consumer confidence, leading to slower demand for new cars," said Paul Everitt, SMMT chief executive.

TOP 10 SELLING CARS IN JUNE 1. Vauxhall Corsa 2. Vauxhall Astra 3. Ford Fiesta 4. Ford Focus 5. BMW 3 Series 6. Volkswagen Golf 7. Mini 8. Vauxhall Zafira 9. Peugeot 207 10. Vauxhall Vectra Source: SMMT

"This slow-down is not unexpected, but signals an increasingly tough retail environment," he added.

In its statement, the SMMT said that: "At present, concerns are that gross domestic product growth will slow rapidly in the second half of the year and settle at around 1.5% in 2009.

"Consumer spending has been bolstered by a cut in the savings ratio, but how long it can withstand rising cost pressures remains to be seen."

Fuel efficiency

Despite a decline in total car sales, demand for diesel cars has improved even though the price of diesel is higher than unleaded petrol.

Latest figures from the motoring group the AA showed that on average unleaded petrol cost 119 pence a litre. For a litre of diesel, the cost was 132.4p.

Analysts say the growing popularity of diesel cars is because they are more efficient to run and attract lower tax rates as they have lower carbon emissions.

"Whilst the overall market has fallen, diesel registrations have continued to improve," the SMMT said.

"Diesel is now noticeably more expensive than petrol at the pumps, but better fuel efficiency and lower tax rates, due to lower carbon dioxide has sustained growing demand."