The rise in car sales over January means that the motor trade insurance business could be in for a good year despite the gloomy speculation surrounding the industry.

Whilst pessimism over the UK motor trade industry has been rife since the onset of the economic depression in late 2008, the sales for January 2010 have risen by 29.8% in comparison with those in 2009. According to the Society of Motor Manufacturers and Traders (SMMT), 145,479 new cars were registered last month – far better numbers than car manufacturers had expected for 2010.

The SMMT has forecast sales of 1.82 million cars for the whole of 2010; this is a fairly pessimistic outlook as it represents a 9% fall on 2009, when 1.99 million cars were sold. On the face of things, this seems like a large figure – but 2009 had the lowest number of cars sold in a year since 1995.

The SMMT has predicted that the introduction of VAT and the end of the scrappage scheme could mean a slow year for car manufacturers. By extension, this could have meant a slow year for motor trade insurance providers. Not only would individual people have been less likely to take out insurance policies on their personal vehicles, but insurance for the motor trade itself would decline – fewer cars being sold means less demand for dealerships, which means less need for insurance which covers premises and test drive cars.

However, January’s strong sales have defied the SMMT’s predictions. In part this is probably due to the extension of the scrappage scheme until March 2010, rather than in January as originally intended. Significantly though, car sales still rose despite the increase in VAT – something that car manufacturers thought would cripple their sales.

Although the motor trade probably won’t climb back to the levels seen since 1995 anytime soon, it still seems likely to exceed expectations. Also, as bleak as the statistics may seem with the phrase “worst year since 1995″, on inspection the 15 years where annual car sales exceeded 2m are actually more extraordinary than those of the past two years. Until 1995, car sales had never been above 2m for two consecutive years. Which puts the doom and gloom in perspective, if nothing else?

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