Drivers plan to spend less on cars in 2010, but the number
planning to fund car purchases using their savings has dropped, a
report by AA Financial Services has found.

Its latest Car Purchase Index (CPI) found that 41 percent of
respondents said they would use savings to fund a car purchase,
down from 49 percent last year.

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There was also a drop in the number of people planning to take
out a loan, at 16 percent, compared with 20 percent a year ago.

Some of the slack has been taken up by cash: The proportion of
respondents planning to use cash to buy a car doubled, from 7
percent a year ago, to 14 percent.

“This suggests that many people are able to use funds such as
redundancy payments or pension lump sums to help them buy a new
car,” said Mark Huggins, director of AA Financial Services.

The survey found buyers wanted to spend less. “Although the most
popular price-band in the CPI is still £5,000-£10,000, with 32
percent saying they will spend this much, this is a fall of 3
percent compared to last year.  More people are planning to
spend under £5,000 (23 percent compared with 19 percent last
year),” AA Financial Services said.

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Overall, there was a slight rise in the proportion of people
surveyed who said they were planning to buy a car in the next 12
months, from 18 percent last year to 20 percent.

Buying new rather than used also gained in popularity, the
survey found, with 21 percent saying they would buy new, up by 3
percentage points from this time a year ago.

“This suggests that metal is moving off forecourts and the slow
recovery should gather momentum. 

“I have no doubt that the extension of the car scrappage scheme
to the end of February 2010 is helping – but if this isn’t extended
again new car sales could slow down again,” Huggins commented.