UK new car sales surge to 10-year high in 2014

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New UK car sales hit a 10-year high in 2014, boosted by confidence in the economic recovery, the Society of Motor Manufacturers and Traders has said.

In total, 2.47 million new cars were registered last year, up 9% on 2013 and the best annual performance since 2004.

Sales rose each month last year, with December's rise representing the 34th consecutive monthly jump.

The SMMT said the strong performance reflected the release of pent-up demand from the recession years.

Car sales were badly hit by the economic downturn which started in 2008, with new registrations dipping below two million in both 2009 and 2011.

SMMT chief executive Mike Hawes said the robust performance meant UK new car registrations were now back at pre-recession levels, with only the years 2002, 2003 and 2004 seeing more registrations than last year.

"We expect a more stable 2015 as demand levels off," he added.

The numbers mean the UK retained its ranking as the second largest market in the EU for new car sales, after Germany.

Sales of electric cars saw the biggest growth last year, with sales quadrupling to 14,498 from 3,586 in 2013.

Mr Hawes said with a variety of new plug-in models due in 2015, he expected this area to continue to "grow significantly".

The SMMT data showed that the Ford Fiesta remained the UK's top selling car, followed by the Ford Focus and the Vauxhall Corsa.

Separate data from The Finance & Leasing Association suggested that the majority of new cars were bought by people using credit.

The UK trade body for the asset, consumer and motor finance sectors said in December that the percentage of private new car sales bought by consumers on finance provided through dealerships hit a new record high of 75.9% in the twelve months to October.

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image captionThe Ford Fiesta is Britain's best-selling car

Analysis: John Moylan, BBC business correspondent

There are several reasons for the stellar growth in new car sales. There was undoubtedly pent up demand following the downturn. And with wages growing, consumers are feeling more confident about buying big ticket items.

Those who bought cars as part of the 2010 scrappage scheme may also have been switching into new vehicles. And millions of PPI payouts may have also helped.

Mark Ovenden, chairman of Ford UK, points to another key factor. With the pound strong and the new car market in Europe soft, carmakers have been trying to sell more products in the UK, helping to keep prices competitive on the forecourt.

But attractive finance packages are also part of the story. Personal Contract Purchase schemes, or PCP's are not new. Their use has soared in recent years. Ford say that in their own dealerships 94% of cars are bought on finance plans and most of those are PCPs.

According to Howard Clifforth, general manager at the TrustFord dealership in Barking in East London, customers can drive away a £9,500 Fiesta - the most popular car in Britain - by providing a £500 deposit and a £166 monthly payment.

Three years later customers can hand back the car and walk away, make a balloon payment to buy the car outright, or roll over into another PCP deal.

Customers are effectively leasing cars in much the same way as they do mobile phones.

But some wonder if this sort of innovative forecourt funding is sustainable. As PCP contracts end, hundreds of thousands of cars may be pushed onto the second-hand market, depressing prices.

That would increase the cost of future PCP deals. Rising interest rates in the coming years could send the cost even higher.

Best selling cars for 2014

1. Ford Fiesta: 131,254

2. Ford Focus: 85,140

3. Vauxhall Corsa: 81,783

4. Volkswagen Golf: 73,880

5. Vauxhall Astra: 59,689

6. Nissan Qashqai: 49,909

7. Volkswagen Polo: 48,004

8. Audi A3: 45,581

9. Fiat 500: 44,005

10. Nissan Juke: 39,263

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