Car tax changes trigger record breaking sales in March

New car sales figures are heading for a record March as an anticipated 40,000 motorists brought forward their planned purchases in order to avoid Vehicle Excise Duty changes which came into affect on the 1st April 2017.

With figures for the month due this week, some estimates predict that the biggest-ever March sales total will have been recorded in the UK, with up to 550,000 new cars being registered. That would be an increase of around 6% compared with March 2016, when 518,707 new cars were registered.

Car dealers are using the VED rises in their sales pitches to potential customers, particularly the large number of car buyers currently on PCP finance deals, which have the flexibility to allow owners to exit a contract early and sign up for a new, lower-tax car.

The VED changes affect cars costing more than £40,000 to the tune of hundreds of pounds a year, meaning that some drivers might save well over £500 over a two-year PCP deal by switching to a car with a lower VED rating.

Everything you need to know about VED

The sales distortion caused by the new VED system is likely to have repercussions throughout the year, with month-on-month drops in new car registrations expected in April, May and June.

The industry continues to predict that full-year new car registrations will fall in 2017 as Brexit takes effect and economic confidence drops. The Society of Motor Manufacturers and Traders is predicting that a total of 2.54 million new cars will be registered this year, compared with 2.69m last year. There are also concerns that interest rates will rise, pushing up the cost of car finance.

Distributors who had to forward-order production late last year will also cut back supply during the remainder of the year and that will push down registrations.

Last month’s new car sales boom follows one of the quietest Februarys for more than half a decade.