Car buy­ers shift­ing to used ve­hi­cles

New car price in­fla­tion more than dou­bles

The Star Early Edition - - NEWS - Roy Cokayne

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.

PHOTO: SIMPHIWE MBOKAZI

Ve­hi­cles on sale at The Glen shop­ping cen­tre, south of Jo­han­nes­burg.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.