While new car sales were up, record high fuel prices and a higher VAT rate saw consumers delaying purchasing decisions in the used car segment.<\/p>\n
This is according to Kriben Reddy, head of TransUnion Auto in South Africa, who notes that it has been a challenging quarter for the South African car market.<\/p>\n
“In real terms, cars are cheaper than they\u2019ve been in over a year. But this has not been enough to offset the impact on consumers of fuel price hikes of around 20% this year alone, ongoing rand weakness and the prospect of higher interest rates,” said Reddy.<\/p>\n
According to the latest TransUnion report, the Vehicle Pricing Index (VPI) for new and used vehicles dropped significantly in Q3 2018 – down to 2.3% and 2.1% from 3.1% and 3.6% in the same period last year.<\/p>\n
Although new finance deals increased by 7% in the quarter, this was offset by a 9% decrease in used car finance deals, seeing an overall drop of 4% in the volume of passenger vehicles financed year on year.<\/p>\n
Not all doom and gloom<\/strong><\/p>\n However, it\u2019s not all doom and gloom, said Reddy.<\/p>\n While industry body Naamsa\u2019s figures show new passenger vehicle sales down 0.3% in 2018, and light commercial vehicles down 2.4%, vehicle exports hit a record high last month – giving the local auto industry a much-needed boost.<\/p>\n Another encouraging sign was the new vehicle pricing index being ahead of the used vehicle index for the second consecutive quarter, Reddy said.<\/p>\n In line with TransUnion forecasts, the used-to-new ratio decreased from 2.45 in Q3 2017 to 2.08 in Q3 2018 \u2013 in other words, 2.08 used cars are financed for every new car.<\/p>\n In all, 41% of used vehicles sold in the quarter were under two years old, and 10% were demo models, which indicates consumers are opting for newer models where possible.<\/p>\n The percentage of cars (new and used) that are being financed below R200,000 has moved to 36% – the lowest since Q1 2013.<\/p>\n The highest recorded percentage of finance deals is for vehicles over R300,000, with the average used car loan staying consistent at around R291,000.<\/p>\n Prices will be affected<\/strong><\/p>\n Although consumers are still opting for the better value proposition, the prices of baseline new vehicles are above this threshold, and have moved into the R200,000-R300,000 band.<\/p>\n Reddy said that he expects the current declining VPI trend to continue into the next quarter, with modest increases in volume for new vehicles expected.<\/p>\n He added that the depreciation of the rand should continue to help the export market be more competitive, as evidenced by record high export sales for September 2018.<\/p>\n “However, the depreciation and volatility of the rand in this quarter has impacted the input prices of manufacturers, which will affect the future prices of vehicles,” he cautioned.<\/p>\n “It\u2019s a time to remain cautious and keep a close watch on both affordability levels and credit health in the current economic climate,” said Reddy.<\/p>\n “The combination of a weaker rand and a possible increase in interest rates could put more strain on consumers who have not worked out their total cost of ownership.”<\/p>\n “It\u2019s vital that consumers keep a close watch on their credit health and do their homework before making a major credit decision like buying a car,” he said.<\/p>\n
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