Pre-owned car sales drop 17.7% as buyers rail against price hikes

Used-car prices in South Africa continued to rise sharply in the first quarter of 2023. The biggest hike was in three-year-old cars, which rose 10.2% year on year compared with an 8.3% price increase for two-year-old vehicles and 5.7% for one-year-old cars.

This is according to the latest TransUnion vehicle pricing index, which shows that in the first quarter of 2023, used-vehicle prices on average increased from 7.9% to 8.1% compared with the same period last year. It reflects the challenges faced by consumers in accessing quality used-vehicle stock, said TransUnion, noting that over the same period, the new-vehicle price index increased from 4% to 6.3%.

Price inflation, with declining consumer disposable income and negative sentiment, saw used-car sales drop 17.7% in the first quarter of 2023, it added. Over the same period, new-vehicle sales rose 2.4%.

“The low supply of new-car sales from previous years due to Covid-19, semiconductor shortages [and] the current high demand for used vehicles, means there is a shortage of quality used vehicles. That means consumers have limited options,” said Lee Naik, CEO at TransUnion Africa.

It has seen a shift in the ratio of used to new vehicles being financed, said the information and insights company. A year ago, 2.18 used vehicles were financed for every new vehicle, declining to 1.86 in Q1 2023.

The number of demo models financed in the latest quarter remained stable at 4%, which may indicate consumers are either being driven towards the new-vehicle market or they are opting for significantly older vehicles as the supply of more recent models diminishes and price increases exceed earnings growth, said TransUnion. It noted the trend is unlikely to reverse soon, with a  macroeconomic climate of low growth rates, frequent power cuts and decreasing disposable incomes making consumers and businesses more cautious.

Bucking the trend is the increase in the number of new hybrid and electric vehicles purchased, albeit off a low base. The number of purchasers has grown 10-fold for hybrids and six-fold for electric vehicles year on year, which together, now make up 2.5% of new-vehicle purchases, said Naik.

Consumer buying patterns are being shaped by increasing interest rates and fuel price hikes. In their search for value, they have been gravitating towards hatchbacks or downgrading from two-car households and opting for one slightly more expensive vehicle, according to TransUnion.

SUVs made up more than 47% of new and used financed vehicles in Q1, with consumers aged between 26 and 40 financing almost half of vehicles. Rising prices are further reflected in the average price points, with the percentage of cars (new and used) financed below R200,000 declining to 20% in Q1 2023 from 25% in Q1 2022.