Car market pendulum might be swinging

IS THE car market pendulum swinging away from used vehicles and back to new?

Sales of used cars have accelerated rapidly this year as aboveinflation price increases on new ones have made them increasingly unaffordable to buyers. From a former state of parity, used sales now heavily outnumber new.

But now vehicle finance specialist WesBank says slowing prices and improved consumer sentiment shows signs of pushing buyers the other way.

Analyst Rudolf Mahoney said finance applications for new cars grew 9.7% in August, compared to a year earlier. Used applications were up 2.2%.

He said the changes were reflected in three-month trends, from June to August.

Tellingly, the average new-car finance deal in August increased by only 1.6% from a year earlier.

This time last year, the year-onyear increase from 2015 was nearly 10%. Used prices last month were 8.4% higher.

However, group head of Standard Bank Vehicle and Asset Finance Simphiwe Nghona said it was too soon to draw conclusions and the “recent trend towards used vehicles is not likely to change in the short- to medium-term”.

Mahoney said besides benefiting from a stronger rand, motor companies and their dealers were offering generous discounts and other incentives to move new cars.

“Companies realise they have to generate value for money.”

Buyer sentiment had also been improved by June’s fractional reduction in interest rates.

If, as forecast, another cut followed this month, the mood would improve further and the new-vehicle market continue to grow.

Mahoney was speaking after the Department of Trade and Industry released figures showing that new-vehicle sales improved by 6.5% in August from a year earlier, from 46 224 to 49 222.

As a result, sales for the first eight months of the year crept 0.6% ahead of last year: from 364 279 to 366 316.

Car sales grew 5.1% in August, from 30 600 to 32 161, but were still 0.3% down on the year so far.

Light commercial vehicles grew 10.8% in August from a year earlier, and extra-heavy trucks 12.4%. But medium and heavy trucks continued to struggle. — BDLive