LONDON British new car registrations rose to a record high in March as customers brought forward purchases to beat an April tax rise, a car industry body said, overcoming expectations of a slump after two years of record highs.
New car sales rose 8.4 percent last month to 562,337, the Society of Motor Manufacturers and Traders (SMMT) said, despite forecasts that demand would fail to surpass recent years of booming sales and be hit by Brexit.
Some consumers and businesses sought to avoid paying an increase in excise duty which came into force from April 1 for the most polluting vehicles, the SMMT said, adding it expected demand to fall in the next few months.
"This bumper performance probably means we will see a slowdown in April," said SMMT chief executive Mike Hawes. March, generally the top-selling month of the year, is one of only two occasions when new licence plates are issued.
"Looking ahead to the rest of the year, we still expect the market to cool only slightly given broader political uncertainties as there are still attractive deals on offer."
Demand for diesel cars rose only 1.6 percent compared with a more than 13 percent rise for petrol vehicles, suggesting some buyers may be put off by the prospect of additional taxes on diesel models.
Overall, low interest rates continue to support demand in Europe's second biggest car market, where around 80 percent of sales are made using a personal contract purchase (PCP), whereby a buyer effectively rents a vehicle, typically for two to three years.
At the end of the period they have to decide whether to buy the car outright or switch to a new model and continue making monthly payments, which the chief executive of one Britain's biggest car dealerships Lookers (LOOK.L) told Reuters was helping support demand.
"There are probably 1.4 million people coming off PCP this year and the easiest thing for them to do is just to have another one," said Andy Bruce, who predicts full-year registrations will marginally rise.
"The long-term trend in new and used car sales is driven by GDP and population growth, so inevitably it's going to keep rising unless there's some sort of economic downturn."
(Editing by David Milliken and Alison Williams)