Car sales slump again as Britons tighten their belts

Car sales slumped in February, offering fresh evidence that beleaguered Britons are tightening their belts in the face of job insecurity and the rising cost of living. With many households struggling to absorb the VAT rise and the increase in other costs such as petrol, car sales declined for the eighth successive month in February, to a level 7.7% lower than a year earlier, according to the Society of Motor Manufacturers and Traders. That was a smaller decline than the 18% fall seen in December and 11.5% in January, when severe weather may have prevented customers getting to car showrooms; but analysts said it suggested that underlying demand remains weak. The largest decline was in private sales of cars – excluding fleet purchases by firms – which were down by 26.7% on a year earlier. Howard Archer, of Global Insight, said: "Private sales are likely to be dampened appreciably by the serious headwinds facing consumers. These pressures are likely to make worried consumers very careful about splashing out on a big-ticket item such as a car." He warned that an increase in interest rates by the Bank of England's monetary policy committee, which meets next week, would only make matters worse for hard-pressed consumers. "Even if the Bank of England only edges interest rates up, it will affect consumer psychology, as people are bound to see the move as the first in a series of hikes." Car sales were boosted in 2009 and 2010 by the car scrappage scheme which was part of Alistair Darling's recession-busting fiscal stimulus. The SMMT said the most popular car in February was the Volkswagen Golf, with 2,709 sold, against 2,617 Vauxhall Corsas and 2,483 Ford Focuses.