Fleet and business registrations took the strain in June, with 148,145 registrations, equating to a 61% share of the new car market, according to figures released today by the Society of Motor Manufacturers and Traders (SMMT).

That was 4,236 units down on the June 2016 figure, but year-to-date fleet and business registrations were up 12,555 units on 2016, with 771,577 registrations, equating to 56% of the market.

Overall, the market declined for a third consecutive month with 243,454 new units registered in June. Registrations fell at a slower pace than in the previous two months, by 4.8 percentage points, as demand continued to stabilise following a record first quarter and the subsequent market turbulence caused by the recent changes to Vehicle Excise Duty. The market is now more in line with 2017 forecasts, said the SMMT.

Alternatively fuelled vehicles enjoyed notable growth, with demand rising 29% to 10,721 units to maintain a record 4.4% market share for a second month. Petrol registrations rose by 2.5%, but diesel registrations fell by 14.7% percentage points.

Sue Robinson, Director of the National Franchised Dealers Association, said: “The decrease in diesel registrations shows that there is some confusion surrounding diesel. Modern Euro 6 diesel cars should not be compared to older diesel vehicles.”

However, she added: “It is encouraging to see that more consumers seem to be shifting towards alternative fuel vehicles, which retain a record market share. This is particularly positive as NFDA members remain in the best place to service this burgeoning sector”.

Compact cars, typically powered by smaller petrol engines, proved most popular for all buyers, with superminis and small family cars accounting for almost 60% of the market. Small family cars and SUVs were the only two segments to register growth in June, up 6.0% and 11.3% respectively.

Year-to-date, overall performance remains strong, falling slightly by 1.3 percentage points to 1,401,811 units and putting the market on track to meet 2017 forecasts.

Mike Hawes, SMMT chief executive, said, “As forecast, demand for new cars has started to cool following five consecutive years of solid growth but the numbers are still strong and the first half of the year is the second biggest on record.

“Provided consumer and business confidence holds, we expect demand to remain at a similarly high level over the coming months. It’s encouraging to see alternatively fuelled vehicles experiencing rapid growth but adoption is still at a relatively low level and more long term incentives are required if this new generation of vehicles is to be a more common sight on British roads.”

Graham Hill, car finance expert at the National Association of Commercial Finance Brokers, added: "It was always forecast that March's stampede to beat the VED deadline would in turn mean less registrations in consequent months, so this is no great surprise.

"Set against the wider backdrop, the new car market is still in rude health - after all, the first half of the year was the second biggest on record.

"A large proportion of this success has to be attributed to the uptick in car finance, which accounted for around 86% of new car sales last year.

"Manufacturers looking for stronger sales in the second half of the year will turn to providing larger discounts and bonuses to make car finance deals look more attractive. 

"They have the ability to do so as new car prices in the UK are the highest in Europe, providing plenty of wriggle room.

"As the FCA continues to look into the lack of transparency around the selling of certain car finance deals, the sabre-rattling around the actual finance products themselves needs to soften.

"It already looks like the adverse publicity surrounding Personal Contract Purchases in particular has knocked consumer confidence in the product. Carry on like this and we risk driving away consumers and talking the market into an early grave."

Chris Bosworth, director of strategy at Close Brothers Motor Finance, believes there may be further market disruption afoot. He said: “With the Brexit negotiations in full swing, the UK has entered into a period of unchartered economic uncertainty, and we anticipate this will have a real impact on consumer spending habits in the months ahead.

“Indeed, one in 10 British motorists questioned for our latest Britain Under the Bonnet survey said that Brexit has already had a direct impact on their future car-buying plans, making them more likely to purchase a used car or to hold off their purchase altogether.

“As such, we expect that consumers will start to gravitate towards the flourishing second-hand market, particularly those 1-3 year old, ‘nearly new’ vehicles.”

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