The new car mystery

By Finlo Rohrer BBC News Magazine

As the global financial problems continue, the car industry is suffering badly, with new car sales down 36.8% in November. But how in the current climate could anybody be persuaded to buy a new car?

As most people already know, the car industry is in a spot of bother.

It has had some wonderful, blissful, dreamy years in the past decade. After starting to rise strongly in 1998, new car registrations in the UK reached a glorious peak in 2003. There were 2,579,050 units sold, according to the Society of Motor Manufacturers and Traders. The next year was only fractionally worse.

NEW CAR SALES Peak year in 2003 Sales this year forecast at 2.1m Lowest since 1996 Sales in 1991 during last recession at 1.6m Figures: SMMT

Just four years on, sales are falling off a cliff, and the same picture is repeated in the US and around much of the world. Sales to private customers in the UK, which make up 42% of the units shifted, are worse affected even than fleet car and other business transactions.

But there's long been a puzzling thing about the car business. Why do people buy new cars at all? Motoring columnists have always drawn attention to the massive depreciation that many new cars suffer in their first year. In the old day, when cars were less reliable, buying a used car was seen as something of a gamble. But no longer. So why doesn't everybody just wait a year or two and then buy their dream car, hardly driven, at a bargain price?

For motoring journalist Paul Horrell, a consultant editor on Top Gear magazine, new cars are no more an illogical purchase than the various other products in the High Street that have been hit but are still selling.

Factory fresh

"It's no different than buying anything else. Why are people still buying new televisions?

"They want the newest thing and they want something that somebody else hasn't had before. The second-hand car looks like a bargain but some people just want something that's factory fresh."

The car industry is well used to the idea of boom and bust

That freshness is something that Bill Taylor likes. It's his answer to the question: "Why do you want to buy something that drops 25% in value as soon as you drive it out of the showroom?"

The retired IT director from Devizes has just got his hands on a Jaguar XJ. He loves the feeling of driving something that hasn't had another owner. Then, of course, there's the celebrated "new car smell".

"If you have a leather interior you can't fail to notice it. There is just something nice about having one that someone else hasn't despoiled. You know the history of it."

Mark Lavery, chief executive of Cambrai, the dealer chain where Mr Taylor bought his car, thinks much along the same lines.

Luxury brands

"There's nothing that smells nicer than a new car. I get a real buzz purely because of the smell.

"When you are the first owner, you know exactly where it has been, exactly what it's done. You park it in the garage and you know it hasn't been abused."

Production will drop dramatically and eventually prices will go up

And, he says, there are some customers out there for whom even a dealer-checked used car can never be a truly safe purchase. They are conservative people who just cannot feel comfortable in a second-hand car.

Of course for those who do buy a car, particularly a luxury car, things have never been cheaper. Sales of luxury brands have been catastrophically affected. BMW's UK sales were down 41% in November. Mercedes were down 57%.

"There has been no better time to purchase a new or used car. The industry is having a torrid time," Mr Lavery admits.

Mr Taylor managed to get