Car market bubble could burst, expert warns

The current boom within the motor trade industry is set to “reach the end of the road”, according to David Bailey.

Writing for AM-Online, the professor of industrial strategy at Aston University Business School says that “sales are peaking and may even decline slightly next year as the credit-fuelled new car sales boom reaches the end of the road”. He pointed to the fact that 75 per cent of cars are purchased on finance, which is an unsustainable way of delivering market growth.

Mr Bailey’s prediction might spark concerns among car dealerships at a time when the market is reportedly booming. Moreover, it contradicts other claims that the problem the used car market faces is not financing but in fact the lack of a steady inflow of quality vehicles. Nevertheless, in the unpredictable world of business, what holds true is that motor trade insurance is as important as ever - this will cover a business against unforeseeable events in the future.

Moreover, if the market does experience a dip, traders can work with expert insurance brokers - such as Bollington - to ensure they have the right level of cover. As vehicle values fall and the market declines, the scale of the insurance can be reduced, thereby saving a business money on its policy.

In the professor’s opinion article, he goes on state that “there are signs that the engine behind the sales boom is already starting to splutter”.

He suggests that the personal contract purchase or plan (PCP) financing scheme, which the big car firms’ finance divisions used to lure customers into showrooms, “may lead to a wave of used cars hitting the second-hand car market, in turn depressing second hand values”. This could result in market depreciation.