The number of new cars sold in a country has always been one of the main barometers to the health of the economy. Unsurprisingly, car sales have slumped in Ireland when compared with 2008, down over 60% year on year.

Figures from the motor industry show that car sales are down 39% for June 2009 when compared with the same month in 2008. While the June figures appear to show a much smaller drop in car sales figures when compared with the rest of the year, June 2008 had experienced low levels of sales.

While car sales figures are usually viewed in isolation, the car rental market in Ireland during 2008 was responsible for over 12% of all car sales. To the year to date, car rental companies have been responsible for over 10% of all registrations, but the difference of 2% hides the actual figures which are drastic. The total number of new cars supplied to the car rental market has declined by 70% from January to May, or from over 14,000 cars during 2008 to over 4,000 cars during 2009.

With such a massive decline in new cars being purchased by the car rental sector, there is concern that prices could be pushed up. Fewer visitors are expected in Ireland during 2008 which will go some way to ease demand, but car rental companies are also bound to be approaching 2009 with a very cautious outlook, focusing more on fleet usage wherever possible.

“We did a forecast at the end of the first quarter and we did three different scenarios and in the worst case scenario, the numbers visiting the island of Ireland would be down 8 per cent. So we would expect 8 million overseas visitors to visit this year, compared to 8.8 million in 2008.” – Tourism Ireland

In previous years car dealers supplied the car rental market with buy backs, where they would sell the car to the car rental agency with an agreed price for the car to be bought back by the dealer at the end of an agreed timeframe. This allowed car rental companies to expand their fleet during peak periods.

However, the credit crunch and declining sales figures for new cars has left many car dealers in Ireland with yards full to the brim with aging stock, and not wanting to take cars back they had previously sold.

There are many factors to be considered when comparing car rental costs to the tourist including short supply of cars. Many car rental firms will be using aging stock which are likely to be more costly to run, and harder to upgrade to newer stock. Used cars have to be sold by the car rental companies, which have also fell heavily in price over the last 12 months.

Many car rental companies will end up with an aging stock with high mileage and high maintenance costs. Car rental companies such as Thrifty Car Rental are working hard to modernise their fleet and grow market share.

Paul Redmond, chief executive of the Car Rental Council has recently said that while dealers were willing to engage in car hire schemes, the tightening of credit has led to banks refusing to take the risk associated with the value of cars being bought back.

“Dealers have cleared their used car stocks and the banks have moved to reduce their credit facilities so having reduced stock to very low levels they are left with no funding to restock or to engage in car hire programmes. A relief allowed to tourists since the early 1990s that meant they didn’t have to pay a proportion of the vehicle registration tax that applies in Ireland is being abandoned by the Government from 2010.” – Paul Redmond – Car Rental Council Chief Executive

Related Stories
- Car rental woes to impact tourists
- Retail sales plunged in April, led by motors

Originally Posted on the Travel in Ireland Blog.

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