Car sales fall but drivers will bear fuel hike

The credit crunch and rising fuel and tax costs have hit new car sales but motorists say there's miles to go before they would ditch their vehicles.

Figures have shown purchases of new cars plummeting in July, with the Society of Motor Manufacturers and Traders (SMMT) reporting 153,420 new cars registered in July 2008 - a 13% fall on the July 2007 figure.

But research from insurer esure claims that despite petrol prices increasing by more than 20% in a year, motorists would endure more hikes.

On average, motorists have said they are willing to pay up to £1.75 per litre for petrol - 60p more than the current Petrolprices.com average - before giving up their cars in favour of alternative transport.

Rising fuel prices and soaring household bills have conspired to make a new car an unaffordable luxury for more people, and sales have now seen steady decline for three successive months, according to SMMT figures.

'The July decline in total sales reflects the continued deterioration in consumer confidence being experienced across the economy,' says SMMT chief executive Paul Everitt.

'Vehicle manufacturers are doing their bit to support consumers, though, and new cars are now 22% more affordable than they were 10 years ago and new technology is delivering more fuel efficient motoring.'

Growth in demand for alternatively fuelled vehicles has offered some hope for the suffering vehicle manufacturing industry.

Last month saw a 19.4% increase in sales, sparked by rising petrol costs as well as hightened environmental concern.

'The industry needs the support of the Government in order to encourage the uptake of lower-emitting vehicles and ultimately lower the cost of motoring for consumers,' Everitt says.

Greener vehicles are likely to benefit from increasing interest over future years, with Britons keen to save money but reluctant to give up their cars.