Drivers are set to benefit from cheaper cars as the interest rate drops offer a promising push for the automotive sector.
The cheaper costs follow the Bank of England lowering the interest rate from 5.25 per cent to five per cent, a move which has not happened since 2020.
The Bank’s Monetary Policy Committee voted to reduce the base rate from the current level after the target for the consumer price index was reached.
The change in percentage will mean that the amount drivers pay on vehicle purchases and car loans could be significantly less.
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UK car production dropped by 7.6 per cent in the first half of 2024
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This marks a crucial change for the automotive industry which is still recovering from high inflation and the offset of Russia’s invasion of Ukraine.
The struggles saw car production in the UK drop by 7.6 per cent in the first half of the year, according to the latest data from the Society of Motor Manufacturers and Traders.
Philip Nothard, insight director at Cox Automotive explained that the Bank of England’s decision to reduce the base rate by 0.25 per cent to five per cent marks a “positive turn” for the automotive industry.
He said: “This reduction will lower the cost of vehicle purchases and ownership for consumers, making cars more affordable and accessible.
“Businesses will benefit from reduced financing costs, encouraging investment and growth within the sector.”
Additionally, Nothard detailed how the decrease in the overall cost of living will boost consumer confidence and spending power.
This could in turn stimulate demand for new and used vehicles. “This move by the BoE is a welcome relief for the industry, promising a brighter outlook for the coming months,” he highlighted.
Meanwhile, Will Davies, chief deposits officer at Ford Money, warned that drivers need to be “quick off the mark” if they want to bag the current savings rates.
He stated that while this is good news this “golden window won’t last for long,” so potential buyers looking for their next vehicle should act quickly.
Davies added: “It’s wise for consumers to review their existing accounts and be prepared to ditch and switch if their provider is offering subpar rates.
“For those able to lock away their cash for a longer period, securing a fixed rate deal is a prudent option as it will extend the period during which savers can enjoy inflation-beating returns, regardless of future rate changes.”
Elsewhere, CEO of My Community Finance, Tobias Gruber, described the lower base rate as a “long-awaited relief,” but said it’s frustrating that “it took this long”.
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Drop in interest rates seen as a ‘positive step’ for the car industry
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Echoing Davies’s warning, Gruber urged drivers not to wait and act now while prices are low to get the best deals for financing options.
He commented: “You need to lock in now to avoid losing out.”
