South Africans turn to used VWs and Toyotas as economy bites
Political and economic uncertainty in South Africa is affecting consumer buying behaviour, says Rudolf Mahoney, head of brand and communications for WesBank.
And this is backed up by credit bureau, TransUnion, who said recently that more vehicles from all sectors are being financed below R200,000 when compared to Q1 2016 and Q1 2017 in SA.
- Sum of <R200,000 – 52%
- Sum of R200,000 – R300,000 – 25%
- Sum of >R300,000 – 23%
It said that for every new vehicle financed, 2.49 used cars are being financed.
“This consumer shift opens up new possibilities for the industry in terms of used vehicles and it is worth noting that 40% of all used vehicles that were financed in this quarter were less than two years old. This 40% can be further broken down into 25% of vehicles that are under a year old, while 15% are under two years,” said Derick de Vries, CEO, Auto Information Solutions at TransUnion.
“But as the demand for used vehicles increases and supply comes under pressure this is likely to push the price up on used vehicles further and a shift back to the new car market,” de Vries said.
Read: South Africa’s used car prices vs the world
Price trend for vehicles finance since 2011
Mahoney attributed poor sales numbers to buyer uncertainty.
Two indicators of this uncertainty among consumers are seen in WesBank’s data. In May, there were year-on-year increases for average deal duration in both the new and used market. Statistics showed that consumers were hesitant to replace their vehicles, with the replacement cycle extending by 9% compared to May last year.
Affordability and value-for-money also continue to factor into purchase decisions. Demand for balloon payments has risen 13%, year-on-year, showing that consumers are seeking ways to lower monthly instalments.
The demand for used vehicles continued unabated, Wesbank said, with the used-to-new ratio reaching 2.37-to-1 in the past month, not far off the ratio supplied by TransUnion’s data.
“A lot of uncertainty exists as a result of recent economic developments, making it difficult to accurately predict the outlook for the motor industry for the remainder of the year,” said Mahoney.
Applications volumes for new cars reached 39,637 in May, versus 93,924 applications for used vehicles.
The bank noted that that the average value of a new car financed last month hit R295,500, up from R279,116 a year ago.
Volkswagen and Toyota have captured more than 50% of the new car market, and lead the used car market as well, TransUnion’s data showed.
Read: These 3 worrying car buying trends perfectly sum up the mood in South Africa right now
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