RECORD profits at Sunderland-based car dealership group Reg Vardy are largely down to lower new car prices and higher consumer spending, it said yesterday.

Figures released yesterday show pre-tax profits rising to £32.6m in the year to April 30, from £24.3m, with turnover up 6.4 per cent to £1.4bn.

Sir Peter Vardy said the group's most successful year of trading on record had been driven by a big increase in new car sales.

He said: "What we've got are cheaper cars in the UK than we've ever had before, relative to income, low interest rates and high levels of disposable income. That's an ideal scenario for motor dealers.

"People who are finding they've got more disposable income are trading up from second hand cars to new cars.

"But we've also got people trading their cars more often - instead of keeping it for four years, they might keep it for two years."

Sir Peter said that had contributed to 25-per-cent more new cars being sold in its volume division and 56-per-cent more in its specialist division.

About half of the rise is down to new models being introduced, such as the Jaguar X-Type and the BMW Mini, with the remainder due to the growth in the market.

The company is now waiting to here proposals for the new EU Block Exemption regulations, which are due on July 17, before deciding how to implement expansion plans.

Sir Peter said: "The dealership model is alive and well and going to continue in the future. We're going to see a bit of change, but it might be evolution rather than evolution."

"We want to move from 73 dealerships to 100 dealerships and that would mean we move from a £1.4bn turnover to £2bn of turnover."

He said the timescale would depend on what type of business are acquired, adding: "If we bought individual dealerships one at a time it'll take us about three years to get there.

"If we manage to find a smaller or medium sized group, we'll get to the £2bn an awful lot quicker."

And he underlined the company's commitment to the North-East, adding: "It's our heartland. The North-East is where we started and it's where we have some of our best dealerships and some of our best people."

Vinay Bedi, director at Wise Speke, the North-East's largest stockbroking and financial services firm, said: "Reg Vardy PLC's results were broadly in line with expectations, but this should not take anything away from what is an excellent set of figures.

"The Group is now generating excellent free cash flow and was able to significantly reduce debt in the last year."