Stocks drying up in SA used car market

 ·3 Dec 2017

South Africa’s new vehicle industry has seen yet another month of growth, despite macroeconomic challenges, while the used-to-new ratio for November 2017 is at its lowest point this year, as stocks dry up in the used market, says Wesbank.

According to the latest aggregated sales statistics from the National Association of Automobile Manufacturers of South Africa (Naamsa), new vehicle sales in November grew 7.2%, year-on-year. Total sales amounted to 49,754 units.

The majority of sales growth came from an incredibly strong showing in the rental channel, which saw a surge in year-on-year sales, said financial services company, Wesbank.

This is attributed to rental car companies re-fleeting ahead of the holiday season. Another growth driver was the passenger car dealer channel, which grew by more than 8% year-on-year, it said.

“It’s clear that the rental car companies are planning for a busy festive season, with sales growth in this channel up by nearly 3,000 units. However, we cannot discount the strong sales showing for passenger cars in the dealer channel,” said Rudolf Mahoney, head of brand and communications, WesBank.

“This growth is attributed to three main factors: age, value and supply of used cars.”

WesBank’s data showed that the current replacement cycle for new cars is at 44 months. The ageing carpark means consumers are ready to replace their vehicles before service and warranty plans lapse.

These consumers also want new cars that bring a promise of reliability as well as fuel-efficient technologies. For these buyers, the current marketing incentives from OEMs offer excellent value at a time when they are ready to replace their cars.

Finally, many buyers are simply unable to shop in a used market where stocks are drying up, resulting in price inflation for used cars.

Evidence of the slowdown in the used market is seen in WesBank’s data. Demand for new vehicles, as measured through the volume of credit applications received, grew 3.6% in November. Conversely, demand for used cars slowed 2.6%, year-on-year.

The used-to-new ratio for November 2017 was 2.16:1 – the lowest this year, said Wesbank.

Read: South Africans turn to used cars, and ditch premium models for locally made ones

“The current consumer activity in the new vehicle market is indicative of the appetite for a good deal. Consumers are willing to buy new when they can see value,” said Mahoney.

“However, buyers should also be responsible and plan ahead when considering a car purchase. In addition to ensuring their budgets can comfortably afford their monthly instalments for the next five to six years, they should also leave enough room to absorb rising ownership costs such as fuel, insurance and maintenance.”

Read: How much it costs to open a car wash franchise in South Africa

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