8:54 am, July 11, 2014
A HIKE in interest rates will not affect UK car sales believes Lookers boss Andy Bruce.
The dealer group’s chief executive has said that car manufacturers passing on their gains from foreign exchange could very easily offset any future rise in rates.
Speaking to Reuters, Bruce said: ‘Every quarter-point movement, if it’s passed on to the customer, is £3 a month. It’s not going to stop somebody buying a car. So even three or four interest rate rises on that basis is not going to fundamentally change the affordability of the car.’
Bruce went on to say that the rise would equate to just over £100 being added to the cost of an average vehicle on a three-year finance personal contract plan, or PCP.
The chief executive’s comments come as many economists have declared any rise in the UK’s record-low 0.5 per cent base rate would have a damaging effect on the car industry because of up to four-fifths of sales being on cheap credit.
Bruce’s view is that thanks to the pound’s current strength against the euro, many car makers could absorb the rise which helps importers of euro-denominated parts.
Manufacturers such as Ford are feeling the benefits of the strong pound. The Blue Oval does a large percentage of its business in euros such as parts-purchasing and imports –and, according to Bruce, the further that sterling moves away from parity with the euro, Ford gains about £30m in turnover.
He said: ‘The movement in the exchange rate in the last year of eight points is about £1,000 a car to the UK on the basis that the average selling price is about £12,000.
‘That’s the difference between what they will be realising in revenue on the basis of today’s exchange rate versus 12 months ago.’
Bruce admitted that his company was concentrating more on premium brands such as Audi, Bentley and Jaguar Land Rover as margins tended to be higher, and that it was looking to expand and may open an overseas dealership.
‘I wouldn’t say it’s on the horizon but it’s something that I wouldn’t rule out in the long run,’ he said, adding the possible timeframe would be in five or more years.
‘We haven’t got a strategy for it but my personal preference would be the U.S. I think the market is more open there.’
