Car market analysis

The new car market slowed yet again in May. Analysis by the Society of Motor Manufacturers and Traders (SMMT) showed that the month's 187,900 registrations failed to match the figures for either 2003 or 2004. Overall new car registrations are running at about 1.2 million to for the year to date and were down 6% for the January-May 2005 period. Private sales over the same period are down by 12%, showing a significant crisis of confidence in this sector. The SMMT estimates that total new car sales will reach 2.45 million in 2005 - that's a clear 5% lower than 2003?s record-breaking 2,579,000 sales - and some experts believe the figure could be lower if demand by private motorists continues to weaken.

Despite gloomier news from the showrooms, two new records were set in May. Firstly, diesel registrations accounted for 36.8% of the total market. Sales of diesel vehicles are expected to take over 35% of the new car market this year (source: SMMT). A litre of diesel is now over 90p at many pumps, and with the Petrol Retailers Association warning of the imminent possibility of fuel prices hitting £1 a litre, the cost-cutting appeal of diesel cars will continue to underpin firm used prices for diesel models.

The second record-breaker was a boom in sales of new convertibles - over 11,000 left the showrooms in May, taking 6% of the market. The UK now has the second largest convertible market in Europe. Prices of used soft tops are currently at their summer peak, with traders chasing sought-after cars such as A4 Cabrio, 3-Series, CLK Cabrio and 9-3 when they come up at auction.

Out on the forecourts, used car business remains patchy. While there is always demand for tidy high-spec cars - particularly superminis and family hatchbacks with turbo-diesel engines - buyers are shying away from older family cars with high mileages. These may look cheap, but canny buyers know that repair costs are rising steadily, so most punters choose to pay more for fewer miles and greater peace of mind.