South Africans to apply brakes on new car sales

20 April 2017 - 14:30 By Wendy Knowler
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If you're in the market for a new set of wheels‚ now is not the time to buy.

A bleak economic outlook looks set to play havoc with South Africans’ love of the latest new wheels‚ forcing many to settle for used cars or to hang on to their existing cars for a lot longer.

That’s the prediction of Derick de Vries‚ CEO of Transunion’s Auto Information Solutions‚ who released the company’s annual Vehicle Pricing Index (VPI) on Thursday morning.

Newish used cars look set to be in even more demand – 40% of all used vehicles financed so far this year were less than two years old; 25% of them under a year old.

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Between them‚ Volkswagen and Toyota capture more than 50% of the new car market‚ and the two automotive giants also lead the used car market.

“But there is not much separating the top tier from Ford‚ Hyundai and Mercedes-Benz‚” de Vries said.

“With the recent ratings downgrade to junk status‚ we are expecting to see lower access to credit‚ a weakening currency‚ rising inflation and even higher interest rates‚ meaning consumers will have even less disposable income‚” he said.

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“It’s difficult not to have a negative outlook for the medium- to long-term future‚ given our current economic reality.”

The VPI report examines the link between the year-on-year increase in vehicle pricing for new and used vehicles‚ drawing data from a basket of passenger vehicles sold by 15 of the country’s top-selling manufacturers.

It’s those prices which the industry relies on to determine the trade-in and retail prices of used cars.

De Vries predicted that the industry will fall short of WesBank’s forecast of a 1.7% (557 000) increase in total sales in 2017.

“With the possibility of a recession looming‚ should the rand depreciate to R16 or R17 against the dollar‚ this will have an extremely negative effect on the vehicle index for new cars‚” de Vries said.

“Manufacturers may be forced to pass on the higher pricing to consumers‚ which will result in a contraction of vehicle sales‚ as more than 70% of vehicles are imported and subject to currency volatility.”

There’s been an upswing in consumer preference for used vehicles‚ de Vries said‚ with an increase of 26% in used car finance deals in the first quarter of 2017.

The ratio between financed new and used vehicles decreased from 2.50% in the last quarter of 2016 to 2.49% in the first quarter of this year‚ he said.

“This means that for every new vehicle‚ 2.49 used vehicles are financed.”

The percentage of cars‚ both new and used‚ being financed under R200 000 remains constant from last quarter – an indication that consumers are “buying down” and looking for more value for their money‚ de Vries said.

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