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What's in store for 2012A look at what's likely to happen to the new and used car market in the next 12 monthsUsed car analysisBy Adrian Rushmoremanaging editor, Glass'sWhen asking dealers about their sales prospects for January we received a mixed response ranging from 'it is too difficult to call' to 'I don't know, but we will just have be prepared for what­ever comes our way'. It is against this backdrop of uncertainty that we attempt to give some guidance for dealer pros­pects in 2012.The forecasts for new car sales from the key commentators are variable, to say the least. The Society of Motor Manufacturers and Traders is saying there will be a modest recovery from the 1.94/1.95 million units. In contrast, the National Franchise Dealer Association suggests that registrations will reach 1.84m, but could be as low as 1.8m units. What is more important is the genuine demand for new cars which, of course, is much more difficult to ascertain. A consensus of trade opinion would put the true demand at least 200,000 units lower than the overall registration total. Popular opinion would also suggest that new car sales this year will be no better than last. To reinforce this, Mervyn King, governor of the Bank of England, stated last November that growth over the next few quarters is likely to be markedly weaker than was predicted by the bank in August, and that the elevated uncertainty will cause businesses to postpone invest­ment, and households to spend less. This comment does not factor anything like the worst case scenario for the fate of the euro and the implications for UK banks in terms of liquidity and their future ability to offer credit.So, if we say optimistically that the true demand for new cars is to remain flat, the only question is to what extent manufacturers will choose to force the market through registration exercises. In other words, if total registrations this year are going to exceed those of 2011, there will need to be more than 200,000 self-registrations. This, of course, is not beyond the bounds of possibility especially as we have seen an escalation in these activities during 2011. This is in spite of the low value of the pound against the euro which currently stands at e1.16, and is supposedly too low for manufacturers to discount much below the normal terms of business. Sales of new cars in the eurozone are likely to have been slightly down on the previous year (perhaps 1%) with Germany the only country to buck the downward trend. Recovery is not on the cards for this year and current estimates suggest that as many as three million cars will be Adrian Rushmore'If total registrations are to exceed those of 2011 there will need to be more than 200,000 self-registrations'Adrian Rushmore, Glass's

New car marketNewsNewsdigestShowroomAMAwardsNew carnewsAMIndexRecruitmentproduced with no buyers for them. This may only serve to increase the pressures for a little more of this surplus production to come our way.Neither will the used car market escape the general economic plight of the nation. As is usually the case, used car sales suffer less than new cars simply because there is always a need for the public and business to remain mobile, and because a used car always offers a more afford-able alternative. It may well be that customers trade down to a lower value car and this often means an older car. Used car sales trends by age of car over the last two years show that beyond three years, the older the car, the more sales activity there has been. It should also be noted that the decline in the sale of under three-year-old cars is partly accounted for by the shrinking car parc which, in turn, is due to the decline in new car registra-tions. So while total used car sales may be little changed from last year at about 6.6m to 6.8m, the spend could edge back.We should also be mindful of the fact that used car purchases are not just about the headline price. Fuel efficiency and running costs will be an even greater consideration this year - the relaxation in fuel duty hikes is seen as only a temporary respite to rising fuel prices - and there will be a reluctance to sacrifice brands and products with strong images. These thoughts will be at the fore whether a customer has a budget of £5,000 or £25,000.The average price of all cars at the end of December was forecast to be £4,750, some 3.5% higher than a year ago. We also know that, in recent years, used car prices have been increasing in line with the Consumer Price Index (CPI) and the increase of 3.5% last year only slightly falls short of the latest figure for CPI at 4%. This all means that the price of used cars is moving upwards in line with the broader mix of goods and services that consumers buy. In other words, cars are not cheap.As we repeatedly said last year, the relative stability of prices has little to do with demand and much more to do with supply. This supply is inevitably going to reduce slightly as we enter the fifth consecutive year of sub 2.4/2.5m registra-tions. Unless there is a significant fall in retail demand this year, prices are likely to remain firm, or increase slightly. And assuming that retail demand is not dissimilar, the competition for stock will remain strong, aided by a continuing shortage of part-exchanges from a flat new car market. What this does imply is that dealers may well find themselves in the middle of a squeezed sandwich where retail buyers stick firmly to their budgets, and tight trade supply keeps competi-tion and prices high.While the outlook for 2012 is not exactly positive, neither are we painting a bleak picture. The used Fuel efficiency and running costs will have even greater imporance for buyers this year