June proved to be a good month for new car sales in South Africa, with 29,886 new passenger vehicles sold – representing year-on-year growth of over 4%.
This continues a positive trend over the past two quarters and has been achieved in spite of a grim economic context.
It also contrasts with a small decline in the light commercial vehicles, bakkies and mini buses category and a serious drop in export sales.
Despite this positivity surrounding new car sales, twice as many South Africans still buy previously owned vehicles, says Jeff Osborne, head of automotive at Gumtree South Africa.
Osborne noted that the current trend into new vehicles is being fuelled by a marginal decline in interest rates, improved confidence and pricing.
“The demand for quality used vehicles has pushed their price up while new vehicle price increases have been repressed in many cases with dealers taking smaller margins,” he said.
“As the price gap narrows, and good maintenance deals are offered, new vehicles become more attractive. That closing of the gap is indicated by the TransUnion Used Car Vehicle Price Index in Q1 2018 rising 3.5% while the New Vehicle Price Index was up by only 2.3%.”
Osborne added that there are implications in this trend for buyers and sellers of previously owned vehicles.
“The data shows that 55% of all used vehicles sold are either demo models or are under two years old. That is now a very competitive space and sellers will have to consider lowering their prices,” he said.
Despite this competition, Osborne is convinced that pre-owned will remain king of the local market.
“I anticipate a minor retreat for new vehicle sales when manufacturers are forced to up their prices more significantly. And, regrettably, the brief wave of optimism in the country seems to be retreating which will translate into a reluctance to spend on the full new price tag.”