Big shift in how people sell their cars in South Africa
The emergence of millennials and generation Zs as increasingly prominent participants in South Africa’s economy has presented a somewhat complex scenario for banks, and from a vehicle financing perspective, says Wesbank motor chief executive Ghana Msibi.
Msibi pointed to a resulting shift in buying and selling patterns in South Africa as one group wants to do research online and then go to a dealership to continue the buying process, while others prefer the entire process to be facilitated online and even have cars delivered to their homes.
This would support evidence of an increasing number of people buying cars online without conducting a test drive or viewing the car in person.
A report by Deloitte showed that 75% of consumers surveyed want to see a vehicle before they buy, and 64% require a test drive. However, only around half (54%) of consumers aged 18 to 35 still want in-person transactions.
“A challenge we face is that we are dealing with a fragmented digital journey, with each stakeholder digitising its own aspects. Migrating to a fully digital world will have implications in terms of direct negotiations, and the relationship between financial institutions and dealers and Original Equipment Manufacturers (OEMs),” said Msibi.
“Trading in a vehicle is a case in point, that creates complexity. Unlike other secured assets, such as a home loan, the contractual relationship of your current car and your next car doesn’t cease at the point you sell your current car. In fact, it overflows as your current car becomes a deposit, to some degree, or a negotiating tool for the price point of your new car.”
Msibi said individual vehicle manufacturers also have a desire to grow market share and therefore inform dealers how much of the retail price they can use in the trade-in process. There are also people who prefer to sell their cars independently, so it doesn’t come into consideration when the price is set for a new car, he said.
“We foresee an increasing number of people taking the option of selling their car outright and terminating the overflow of the relationship between assets.
“Their attitude is ‘I’ll sell my car and take whatever I can get for it, which I believe will be market-related, then enter into a new contract’. Yes, I may lose somewhat on the price of the metal, but I think that over the long term I will make it up through a preferential rate on an offer that I can get from the bank’.”
This process demonstrates how difficult it can be to digitise trade-in processes into a single, seamless buying journey, Msibi said.
Rising interest rates and fuel prices will have some impact on the market in 2022, but generally, the outlook is brighter than at the same stage last yer when lockdown regulations were more stringent said Mark Dommisse, chairperson of the National Automobile Dealers’ Association (NADA).
Commenting on new vehicle sales in January, he said that some sectors in the luxury segment of the car market showed improvements, such as Mercedes-Benz doubling its monthly sales compared to the averages seen in Q3 and Q4 of 2021. “Another good example is Porsche which reported 204 units sold – a 114% increase on the figure in December 2021. Sales of other luxury brands seem to be stabilising, but no massive recovery in this portion of the market is expected in the short term.”
“While gradual interest rate hikes are inevitable over the course of the year from their record lows, their impact should be considered within purchase decisions and affordability,” said Lebogang Gaoaketse, head of marketing and communications at WesBank.
“Rising costs of living amidst more slowly recovering earnings are expected to continue placing pressure on household incomes and the wherewithal for consumers to afford new vehicles during 2022. But price inflation in the pre-owned market and necessary replacement cycles some two years after the onset of the pandemic should be expected to fuel demand.”
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