Good news for new car buyers in South Africa

New data from consumer credit reporting agency TransUnion shows that it is cheaper to buy a new car in South Africa right now – despite a multitude of global and local factors placing pressure on the sector and consumers.

The group’s latest Vehicle Price Index (VPI) – which effectively measures the inflation rate for new vehicles – shows that new vehicle pricing decreased from 8.8% in Q1 2021 to 4% in Q1 2022. This means that new vehicle costs are still below inflation, although this is forecast to increase in the coming months.

By comparison, used cars continued to increase in price in the face of changing consumer demand and supply, TransUnion said, as the used vehicle index increased from 3.7% to 7.9% 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.

“Overall, the global automotive industry had another challenging quarter — with sourcing inventory remaining a significant constraint,” the group said.

“South African interest rate and fuel hikes increased the total cost of ownership. Despite supply chain disruptions, volatility in oil prices, lack of quality used supply, imminent unemployment rate increases, negative exchange impact and further pressure on disposable income during the quarter, sales returned to normal levels.”

The group’s data shows consumers continue to pursue value in the used vehicle market, with more finance deals being concluded in the R300,000+ bracket.

“The push for quality used vehicles and the limited supply is well summed up by used vehicle pricing with the trend remaining strong,” said Kriben Reddy, head of auto information solutions at TransUnion.

“Sourcing inventory has continued to be a major issue, especially with consumers holding onto their vehicles for longer as they become increasingly difficult to replace. The interest rate and large fuel hike in the first quarter did little to dampen the new vehicle sales as consumer demand continues to decrease their total cost of ownership.”

Read: New driving insurance scheme proposed for South Africa – which could knock R2.18 off the petrol price

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Good news for new car buyers in South Africa