Declining interest rates and fuel costs, extended repayment terms and more affordable vehicles — particularly Chinese imports — have led to a recovery in South Africa’s vehicle asset finance market.
The Credit Stress Report for the third quarter, compiled by consumer insights company Eighty20 and Xpert Decision Systems, shows continued credit expansion from the previous quarter, noticeably in vehicle asset finance (VAF).
The number of bank and retail loans rose by 7% year-on-year across all categories except home loans, with personal loans contributing significantly with 8% year-on-year account volume growth.
“South Africa was removed from the Financial Action Task Force grey list in October which will help restore global confidence in our financial system. There has been a subsequent improvement in the exchange rate, a drop in fuel prices and an expected increase in foreign direct investment,” the report noted.
“Retailers will be hoping that Black Friday and festive season sales mirror the record-setting growth experienced in the automotive sector, which has seen strong performance in both new and used vehicle sales,” it added.
New VAF business volumes increased by 12% year-on-year.
“The lowest-ever prime rate after the pandemic was followed by 10 consecutive increases between November 2021 and May 2023. By September 2024, when the prime rate finally began declining, approximately 140,000 middle-class consumers had exited the VAF market — roughly 7% of total VAF holders.
“This contraction was driven by a perfect storm of pressures: stagnant wages coupled with record-high inflation squeezed discretionary income, while rising fuel prices, the presence of alternative transport like Lyft and Uber, widespread work-from-home adoption, and above-CPI vehicle price increases combined to depress car sales and VAF volumes throughout this period.”
But the report found the market has since rebounded significantly.
In October, 55,956 new vehicles were sold — the highest monthly total in more than a decade and a 16% year-on-year increase from the 48,222 units in October 2024, according to the National Association of Automobile Manufacturers of South Africa.
Passenger car sales reached 39,610 units, the best performance since October 2014.
This marks 12 consecutive months of growth and the fourth straight month sales exceeded 50,000 units. The used car market was similarly buoyant, with September recording the year’s highest sales at 33,907 units — a 16.4% year-on-year increase.
Several converging economic factors have encouraged borrowers to re-enter the VAF market.
“The influx of more affordable Chinese imports in a short period of time — nearly half of the 14 Chinese car brands now active in South Africa entered the market within the past two years — has shaken the market.
“While no Chinese brand ranks among the top five bestsellers individually, their collective impact has been profound: Chinese brands have surged from less than 3% of the total vehicle market in 2020 to approximately 13% more recently.
“Most importantly, however, the Chinese brands have entered the market at generally more affordable price points. In spite of the gradual repo rate cuts since November 2024.”
The report noted that another interesting development in the credit data that further contributes towards the easing of affordability pressure was the gradual change in credit terms of VAF originations since 2024.
“At the beginning of 2024, roughly 7% of VAF loans had terms of 90 months or more. That proportion has more than doubled to 16% in September of this year. These longer terms have a positive effect on consumers by making monthly repayment amounts more affordable.
“The significant change in the issuance of VAF loans is a remarkable trend, and it’s being driven by specific consumer groups.
“Nearly 88% of VAF by value is concentrated in two Eighty20 consumer segments: the middle class workers and heavy hitters. As we’re seeing high vehicle sales numbers, these two segments are driving the volumes. A combination of declining interest rates and petrol costs, extended repayment terms, more affordable vehicle options — particularly Chinese imports — and a stronger rand have created these favourable conditions,” said Ans Gerber, Eighty20’s head of data products.
Nedbank’s latest asset ownership report also shows the VAF sector is experiencing a strong rebound this year.
Nedbank said stimulation in the market is also supported by the two-pot retirement fund cash effect.
The bank also found a strong consumer preference for cheaper vehicles, with many seeking the lowest instalment payable possible.
“The latter is evident in the surge of new Chinese vehicle sales. Consumer perception is shifting — Chinese cars are increasingly seen as modern, reliable and value-rich, especially among young professionals and middle-class families,” Nedbank said.
Emerging Chinese brands according to Nedbank include:
- Chery SA with ore than 16,000 units sold in 2025
- GWM/Haval follow closely, selling more than 12,000 units
- Jetour, Omoda & Jaecoo, sub-brands of Chery, are gaining traction with SUVs appealing to younger and premium buyers
- BYD is expanding and plans to triple its dealership network by 2026.
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