New Car Sales Falling: a Sign of the Times?

In the modern world, cars are often considered more of a necessity than a luxury. They get us to work; they get the kids to school in the morning; they enable us to visit family at the weekends. It would follow that sales of cars are a reasonable indicator of the strength of the average consumer's finances.

A new report from the Society of Motor Manufacturers and Traders (SMMT) shows that new car registrations fell by 21% in September, compared with August's figures.

It was the fifth consecutive month that numbers of new car registrations had gone down, and the biggest drop so far - the closest was 18.6% between July and August.

Debt problems or careful planning?

So is this a serious indicator of the trouble the economy faces, or just a sign that people are taking care over their finances?

"It's important to remember that this is a reflection of new car sales, and not necessarily car sales as a whole," says a spokesperson for Debt Advisers Direct.

"It may well be that as we have seen with the supermarkets, consumers are simply keeping to a tighter budget. The market for second-hand cars could benefit, or perhaps people are just keeping their existing vehicles."

But the spokesperson commented that the shift in spending behaviour still reflected a change in consumer attitudes brought on by the credit crunch. "A major factor will be the limitation in peoples' ability to obtain credit. Sales of new cars rely almost entirely on credit, because very few people can afford to pay the full amount up front," she said.

"Even for those who are still able to obtain car finance, many will be concerned about the risks surrounding the economy in general, and may want to avoid credit for fear of falling into debt.

"Likewise, some of those who were able to obtain car finance at the peak of the economic boom may now be suffering for it. As prices of other things such as energy and food rise, more and more people are at risk of debt problems, and the more debts you have, the higher the risk."

The spokesperson added that anyone who does find themselves struggling with debt should not hesitate to seek the appropriate help.

"We advise anyone worried about their debts to contact an expert debt adviser as soon as possible," she said. "They will talk you through your situation and help to find the best debt solution for you."