Car buyers shifting to used vehicles
New car price inflation more than doubles
CONSUMER new and used vehicle buying patterns have changed as new vehicle price inflation more than doubled to 9.4 percent in the fourth quarter of last year from 4.6 percent in the corresponding quarter in 2015.
The latest TransUnion South Africa vehicle pricing index released yesterday also revealed that used vehicle price inflation increased to 3.3 percent from 1.6 percent in the same period.
Derick de Vries, the chief executive of Auto Information Solutions at TransUnion, said the higher new vehicle prices had stimulated demand for used vehicles, and manufacturers had responded to the decline in new vehicle sales by decreasing margins and increasing marketing incentives to boost sales and reduce the delay in potential customers entering the buying cycle.
But De Vries said TransUnion saw the new car market stabilising this year and not contracting further.
“Overall vehicle-related industries need to be aware of the supply and demand factors in both new and used cars.
“Consumer demand has been shifting towards used vehicles due to higher-than-CPI new vehicle price increases. However, as the supply of good quality used stock diminishes, this will cause a natural shift back to the new car market.
“Manufacturers and dealers will need to adopt new marketing methods to remain competitive,” he said.
However, TransUnion said the increase in used vehicle prices in the fourth quarter of last year suggested the trend of consumers purchasing used vehicles instead of new vehicles was still strengthening.
It said new vehicle price inflation had exceeded the consumer price index (CPI) by an average of 3 percent for the past three quarters, leading to an increase in demand for used vehicles.
TransUnion said this was supported by National Association of Automobile Manufacturers of South Africa (Naamsa) statistics indicating a 12 percent quarter-on-quarter decline in new passenger vehicle sales and 9 percent reduction in new light commercial vehicle sales between the fourth quarter of 2015 and the same quarter last year.
De Vries said the 2 percent decline in year-on-year GDP growth compounded the pressure on vehicle manufacturers to increase their prices, which was adding to the financial strain on many households countrywide in the market for a vehicle.
He added that in a volatile economic climate, consumers continued to prefer to hold onto their existing vehicles or purchase a used vehicle rather than a new car.
“Consumers are financing cheaper new vehicles or more expensive used vehicles, and the used-to-new ratio shows that finance houses are financing 2.5 used vehicles for every new vehicle,” he said.
However, De Vries said the percentage of new and used cars financed below R200 000 appeared to have remained constant from the last quarter, which indicated this trend would continue this year.
TransUnion said average monthly repayments had increased year-on-year to R4 910 in the fourth quarter of last year from R4 656 in the fourth quarter of 2015.
TransUnion said the volume of deals financed during the fourth quarter decreased by 25 percent year-on-year on new vehicles and increased by 8 percent on used vehicles.