Used-car prices race ahead while new-car prices flatten
Prices of used cars in SA rose far more sharply than new cars in the last quarter of 2021 due to the scarcity of quality pre-owned vehicles.
Price inflation on used vehicles increased to 7%, up from the 2.9% recorded in the fourth quarter of 2020. Over the same period price inflation on new vehicles significantly softened, recording a decrease from 9.6% to 2%.
This is according to TransUnion’s SA Vehicle Price Index, which measures the inflation rate for new and used vehicles.
“The inflation rate for new vehicles maintained its free fall of the past 12 months in the final quarter of 2021, while used cars continued to get relatively more expensive in the face of changing consumer demand and supply,” said TransUnion’s Kriben Reddy.
“The high demand for quality used vehicles, combined with limited supply, is directly driving the used vehicle pricing trends we’re seeing right now. Sourcing inventory has been a major issue, with consumers and fleets alike holding on to their vehicles for longer.
“With a long waiting list for new vehicles, consumers are opting for the used vehicle market — and prices are not going to ease soon, as interest rates remain relatively low, despite recent hikes,” he said.
Despite the pricing trends, SA consumers continue to buy more used than new vehicles, TransUnion noted. The used-to-new ratio stayed consistent year on year, with 2.31 used vehicles sold for every new vehicle.
In 2021, a record high of more than 637-million total searches were conducted on AutoTrader representing a growth of 28% year on year.
Of the used vehicles, 33% are less than two-years-old, and this continues to decrease as the supply of quality used vehicles remains under pressure, noted TransUnion. Demo models made up 5% of used financed deals in the quarter, down 1% from the previous quarter, which indicates consumers remain in the market for older vehicles as quality supply diminishes and pressure on disposable income increases.
Nearly half (47%) of new and used financed vehicles are hatchbacks, while one in four (25%) are SUVs, said TransUnion. Crossovers make up a higher proportion of new vehicles financed than sedans, which is indicative of consumers looking for multipurpose vehicles.
The percentage of cars (new and used) being financed below R200,000, R200,000-R300,000 and over R300,000 saw year-on-year movement for the fourth quarter of 2021, with activity moving from the under R200,000 bracket into the R200,000-R300,000 bracket. This shows consumers are looking for value in the used vehicle market despite recent interest rate hikes.
“The car market is also seriously affected by the macroeconomic outlook, where we saw the first economic contraction after four consecutive quarters of growth towards the end of 2021. Consumer confidence remains below zero, and the household debt-to-income ratio remains high, which puts significant pressure on consumers’ disposable income. As a result, many consumers will stay out of the new car market at this stage, despite its relative affordability,” said Reddy.
Despite an interest-rate increase and a continued shortage of some models, SA’s new-vehicle market had a healthy start to the year. Sales in January of 41,382 units were 19.5% higher than in the corresponding month a year ago, according to the Naamsa automotive business council.
These figures were delivered despite shortages of some models due to ongoing component shortages, particularly semiconductors.
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