New vehicle prices have surged 4.4% year-on-year while those of used vehicles rose just 0.6%, pushing some consumers to the used car market, according to TransUnion’s vehicle pricing index for the second quarter of 2024.
A 6% decline in new vehicle sales and a 6.1% drop in vehicles financed from the previous quarter confirms the market is under strain and affordability remains a priority, said TransUnion.
In the second quarter, the average loan value for financed vehicles rose slightly to R400,000 (from R391,000 in the first quarter), reflecting the financial pressures on consumers. The number of new vehicle asset finance accounts has dropped to its lowest point since the second quarter of 2020, highlighting the effects of economic challenges.
Combined sales of new cars and commercial vehicles fell again in September to 44,081 units, a 4.1% decline from September 2023. The total market was dragged down by a 17.1% fall in sales of bakkies and minibuses but passenger car sales improved for the second consecutive month, signalling positive signs in the domestic market.
September’s interest rate cut of 25 basis points was the first of what consumers and economists hope is the start of a cutting cycle over the next 18 months, said Lebo Gaoaketse, head of marketing and communication at WesBank.
“Though the economic environment remains tough, the automotive sector is showing innovation in addressing consumer affordability concerns,” said Marcia Mayaba, sales VP of Auto Information Services at TransUnion SA. “The vehicle financing landscape is evolving, with growing interest from younger generations who are reshaping the market through their preference for flexible financing models and electric vehicles [EVs].”
Signals shift
She said a key trend was the rising influence of Gen Z (people born between 1997 and 2012) whose share of new vehicle asset finance agreements grew from 7.9% in the second quarter of 2023 to 10.9% in the second quarter of 2024. Subscription-based models and pay-as-you-drive services, which allow more short-term financial commitments, particularly appeal to this demographic.
The growing influence of younger generations signals a shift towards more flexible, digital-first financing options and sales of EVs gradually gaining traction as sustainability becomes a central concern for younger buyers, said TransUnion.
Increased focus on sustainable transportation, coupled with expanding infrastructure and growing consumer awareness, positions EVs as a key component of South Africa's automotive future
— Marcia Mayaba, sales VP of Auto Information Services at TransUnion SA
The share of baby boomers (people born between 1946 and 1964) dropped from 8.3% to 7%.
Millennials (people born between 1981 and 1996) continued to dominate the market, accounting for 40% of new vehicle purchases. Despite the contraction in vehicle financing, delinquency rates have remained consistent, it noted. This stability suggests that though fewer new accounts are being opened, those in the system are maintaining their repayments.
Declan Jones, executive head at WesBank Ecosystems, said many people tend to “overbuy” vehicles and don’t consider the full cost of ownership when financing a vehicle. Yet there has been a strong trend of customers buying down to used cars and lower-priced new Chinese vehicles as more affordable solutions, he added.
The report highlights the growing potential of EVs in South Africa, though sales still represent a small percentage of total vehicle sales, said TransUnion.
“The adoption of EVs is inevitable, particularly as younger, environmentally conscious consumers drive demand. While the initial uptake has been slow due to higher costs and limited infrastructure, improvements in battery technology, the expansion of charging networks and potential government incentives are set to accelerate this shift,” said Mayaba.
Comparisons with markets such as Europe and China, where EV adoption is rapidly increasing, highlight the room for growth in South Africa, she said. For this to happen, more affordable EV models must be made available and financing options tailored for the younger generation will be essential to help push EV sales forward.
“Increased focus on sustainable transportation, coupled with expanding infrastructure and growing consumer awareness, positions EVs as a key component of South Africa's automotive future,” said Mayaba.
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