The foot's off the pedal

South African motorists are buying down as they feel the pinch of the weaker rand and last year's interest rate increases.

The latest numbers from the National Association of Automobile Manufacturers of South Africa show that consumers are favouring cheaper, smaller cars, Rudolf Mahoney, WesBank's head of research, told The Times yesterday.

Naamsa figures showed that 1.5% more new cars were sold last month than a year ago.

But sales to the car rental industry skew the data, said Nicholas Nkosi, the head of Standard Bank Vehicle and Asset Finance.

"While the February passenger vehicles numbers show a slight improvement year on year, this is not necessarily a true reflection of the change in consumers buying more vehicles, as this is masked by the fact that the car rental industry contributed 9.9% of the overall passenger vehicles sales in February 2015," said Nkosi.

Individual car buyers found it tougher after the interest rate increased by 0.75 percentage points last year.

And fuel prices shot up to more than R14/litre last year.

Mahoney said the applications for financing at WesBank reflect strong demand for used cars.

Applications for used cars were 15% higher than a year ago, and the growth rate was in double digits for most of last year, he said.

For new cars, applications were up only 7%.

Nkosi reports a similar trend. Both new and used vehicle sales grew year on year, but new sales by only 8.2% and used by 32.9%.

This because the price gap is widening and consumers are finding better value in the used car market, Mahoney said.

Inflation on new cars, thanks to the weakening rand, was about 8% last year.

Used cars only became about 2% more expensive over the same period.

Not only are people buying pre-owned, when they spend the money for a new car it is likely to be a tiny one.

At the beginning of last year, only about 22% of new cars sold were in the very small A-segment of the market.

Now small cars account for 30% of all passenger vehicle sales, the data show.