Consumers go for cheaper, older cars amid cash crunch
A shift back to vehicles costing less than R200,000 as consumers continue to feel strain on disposable income has been noted by the latest South African Vehicle Pricing Index Report.
The percentage of cars - both new and used - being financed below R200,000 is at levels last seen in the same quarter six years ago, states TransUnion, which collates the data.
Released on Tuesday, vehicle asset finance results for the second quarter of this year showed 39% were in the R200,000 bracket, 28% in the R200,000-R300,000 range and 33% in the R300,000 price bracket.
The TransUnion VPI report also shows that 2.16 used vehicles were financed for every new vehicle financed.
The make-up of used-vehicle sales shifted too, with just 34% of used vehicles financed being under two years old, and 6% of those being ex-demo models – "which indicates consumers are opting for older vehicles as pressure on disposable income increases".
TransUnion commented: "The South African car market continues to struggle, with the bulk of the buying activity currently taking place in the used-car sector as financially stretched consumers increasingly opt for older cars at lower price points."
Overall, the number of new and used vehicles financed fell 7% and 2% quarter on quarter respectively, according to the TransUnion VPI report.
“There is a direct correlation between current macro-economic conditions – the country’s negative GDP growth of 3.2% for Q1 is the lowest it’s been in the past 10 years – and the constrained new-vehicle market,” said Kriben Reddy, head of auto for TransUnion Africa.
Volkwagen sold the most in both new (26%) and used (25%) light passenger vehicle categories, followed by Toyota (new 24% and used 18%).
Buyers may be able to find good deals in this tough market, the company stated.
New vehicle price increases remained below inflation for the past two years, said TransUnion. This is the longest consecutive period since the creation of the index in 2000. Used-vehicle price increases have also slowed down to 1%, "which is also indicative that the used market is under strain". TransUnion noted this is the lowest price increase since the second quarter of 2014.
“ ... The signs for new vehicle sales are looking stagnant going into the second half of the year as dealers push sales through guaranteed buy-back options and marketing initiatives to suit the consumers’ pocket,” said Reddy.
“What this means is that consumers are in a position of power when purchasing new or used vehicles, with price increases well below inflation for the past two years as manufacturers try to stimulate the market through bargains and discounts.”