Warning after new car sales reach an all time high for second year running

Annual new car sales have hit an all-time high for a second consecutive year – but are expected to fall in 2017, according to an industry trade association.

Around 2.7 million cars were registered in the UK last year, the Society of Motor Manufacturers and Traders (SMMT) said.

This is up by approximately 2.2% on 2015.

The Final figures will be published by the SMMT at 9am on Thursday.

The organisation’s chief executive, Mike Hawes, said growth was due to “very strong” consumer confidence, low interest finance packages and a raft of new models.

“People are obviously driven by new technologies,” he told reporters at a briefing in central London.

“Increasingly people do want to see connectivity. People are wedded to mobile phones. They expect equally to have that connectivity on the move.”

Mr Hawes predicted that registrations would decline by “between five or six per cent” in 2017, but said this was still “historically an incredibly high level” and insisted it would not represent “a collapse in the market”.

He said five consecutive years of increased sales has been fuelled by latent demand built up during the recession.

“We have to recognise that growth can’t be inexorable,” he said. “There is undoubtedly a levelling off.”

Over 85% of new cars bought in the UK are actually imported and their cost is “gradually going up” due to the reduction in the value of the pound, Mr Hawes explained.

Although manufacturers hedge against currency risk and absorb some of the additional costs, there have been price rises of “two or three per cent”, he added.

Mr Hawes expects 2017 car sales to be “lumpy”, adding that although the triggering of Article 50 for the UK to leave the EU would “probably not immediately” have an impact on purchasing patterns, he acknowledged that “we have not seen the full effects of Brexit”.

He went on: “The strength of the market does obviously depend on maintaining a good economy, maintaining the right trading conditions, which will obviously flow through to ensuring that the cost of vehicles remains as competitive as it currently is.

“We don’t want to see tariffs.

“The introduction of tariffs to imported cars could result in as much as a £1,500 increase per car.”

Jim Holder, editorial director of magazines Autocar and What Car?, described the 2016 figures as “very positive”, saying “the expected Brexit bump was mostly negated”.

He told the Press Association that some people within the automotive industry are warning that sales could drop by 10-15% this year, so manufacturers would be “very pleased” if the SMMT’s prediction of a five or six per cent drop off proved accurate.

He added: “When you’re at record levels and you bounce down, I think that’s reasonable.”

:: These are the UK’s new car registration figures for recent years:

2012: 2,044,609

2013: 2,264,737

2014: 2,476,435

2015: 2,633,503

2016: Approximately 2.7 million