Bruce Fraser

Bruce Fraser

The introduction of the National Credit Act and interest rate increases are having a dramatic effect on new car sales.

According to the National Association of Automobile Manufacturers of South Africa (Naamsa), new vehicle sales for June were down 19,1percent compared to the same month last year.

"It's an accumulation of factors," said Nico Vermeulen, director of Naamsa.

"Fuel price increases, lack of disposable income and a number of interest rate hikes have all contributed to a drop in sales.

"The NCA has also had a major impact. More stringent measures have been put in place by financial organisations in offering credit."

Reserve Bank governor Tito Mboweni's concern over the free-spending habits of South Africans was the main reason for the introduction of the NCA and the recent interest rate hikes.

When Mboweni upped the interest rate by 0,5percent in June, he referred to a "psychological problem" that affects our spending.

"If I had my wish, interest rates would be much lower than they are, but then we have this psychological problem to deal with," he said.

But Vermeulen is confident the dramatic drop in sales reflected in June will even out over time.

"The market will take some months to adjust. What the new act has opened up to the public is private leasing. This new concept in financing will take a while to be accepted by the market.

"Rising inflation and the exchange rate are other factors affecting the market," he said.