January 'not good time' to buy cars

Back

Fewer people considered buying a new car during January as the Government scrappage scheme came closer to ending, according to research.

Nationwide said only 32% of people thought it a good time to splash out on major purchases, such as a new house or motor, compared with 35% in December.

The group said its spending index normally jumps in the first month of the year, but last month's dip contributed to a 12 point slide, which could have been caused by the end of several national stimulus schemes.

January saw the return of 17.5% VAT rates and the removal of the stamp duty holiday on properties worth up to £175,000, and the "cash for bangers" incentive to buy new cars is due to end in February.

However, Nationwide speculated people could be using any spare cash to pay off debts they picked up over Christmas instead.

Martin Gahbauer, Nationwide's chief economist, said: "Heavy discounting on the high street and Government driven initiatives, such as lower VAT, the car scrappage scheme and the stamp duty holiday, combined to keep the spending index buoyant throughout much of 2009.

"The removal of these initiatives may now be causing consumers to reconsider parting with their cash at a time of year when we would normally expect to see high levels of spending confidence."

Get a car insurance or home insurance quote now.