Good news for car buyers in South Africa

New data from consumer credit reporting agency TransUnion shows that there has rarely been a better time to buy a new car in South Africa over the last decade than right now.

The group’s latest Vehicle Price Index (VPI) – which effectively measures the inflation rate for new vehicles – maintained its freefall of the past 12 months in the final quarter of 2021, moving from 9.6% in Q4 2020 to 2% in Q4 2021.

By comparison, used cars continued to get more expensive in the face of changing consumer demand and supply, TransUnion said, as the used vehicle index increased from 2.9% to 7% in the same period.

The VPI measures the relationship between the increase in vehicle pricing for new and used vehicles from a basket of passenger vehicles which incorporates 15 top volume manufacturers. The index is created using vehicle sales data from across the industry.

“The increased demand for quality used vehicles — and their limited supply — is driving their prices beyond those of new vehicle increases and inflation. Sourcing inventory has been challenging, especially with consumers keeping vehicles for longer as they become difficult to replace,” TransUnion said.

“Fleet companies are also holding onto their stock with long waiting lists for new cars. Prices show no signs of losing strength as consumers enjoy low-interest rates – despite the recent hike.”

While new vehicle price increases have slowed considerably over the last year, TransUnion said that consumers are still likely to face several hurdles, including strained finances and a limited global supply.

“Overall, the global automotive industry had another challenging quarter sourcing inventory. The South African market experienced similar issues with the global chip shortage hampering new vehicle supply. The used vehicle market’s lack of quality stock is driving high demand.

“And all this amid low consumer confidence, increasing consumer debt to income ratios, COVID-19 uncertainty, rising unemployment, adverse foreign exchange and added pressure on disposable income.”

Buying trends 

Despite the recent 0.25% interest rate hike, consumers continue to pursue value in the used vehicle market, with more finance deals being concluded in the R200,000,-R300,000 bracket.

The data shows consumers aged 26–40 finance almost half of vehicles, with most financing used cars. More than 47% of total new and used vehicles financed are hatchbacks and 25% SUVs.

A higher proportion of new cross-overs than sedans financed suggests a preference for multipurpose vehicles, TransUnion said.

Other key data points include:

  • The used-to-new buying ratio of 2.31 has remained consistent YoY.
  • In the used vehicle market, 33% of vehicles are under two years old.
  • Demo models financed made up just 5% in Q4 2021, indicating consumers are opting for older vehicles as quality supply diminishes and pressure on disposable income increases.
  • Naamsa reports a YoY increase of 3.9% in new passenger vehicle sales for Q4 2021.
  • While the export market remains consistent, growth depends on global restrictions and supply chain disruption. Sales volumes have been low compared to Q4 2020 with total exports decreasing 31% YoY.

Read: Incoming driving laws to bring ‘bite’ to traffic fines in South Africa

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Good news for car buyers in South Africa