Demand is high for used cars
As a consequence, the price of second-hand cars is also holding strong
SOARING demand for used cars has resulted in some of the vehicles not losing value. Some of the cars are being sold for between 70% and 110% of their original prices, according to a car dealership owner.
It is simple economics that a new car loses about 30% of its value once the vehicle has been driven by a consumer out of a dealership.
"In South Africa it does not work like that because used cars do not lose value and their value have stabilised," said Derik Scorer, who owns the country's largest Arnold Chatz Cars dealership.
"The gap between used and new cars has narrowed and there are instances where you find that the price of a used car hovers between 70% and 110% of its original price," said Scorer.
Keith Watson, Standard Bank's head of sales for vehicle and asset finance, concurred saying that the price of some newer used cars was "static". Watson said this could be because the demand for used cars was 300% higher compared to new cars.
Watson said there was unlikely to be price movements on vehicles that were less than six months old.
"This shows that there is a demand for the used vehicles, a consumer appetite which was not there," said Watson.
Brian Smith, used fleet and rental manager at Renault SA, said the value of some used cars was not deteriorating because of a high demand.
"The low interest rates have driven up the demand for used cars and it is quite possible some of the prices of the vehicles at some dealerships have not moved down," he said.