Is a recession a good time to buy a car?
IN England and continental Europe a car is a luxury because public transport is superb.
In fact the Europeans get angry if public transport is more than five minutes late.
It is safe for children to use public transport to schools and, if they have to walk to school from the station it is usually quite safe, provided of course no one has planted a bomb in the area.
In the United States much the same applies in the big cities, but there a car is essential because of the huge area of the country, as well as because of the fact that cars and fuel are cheap in relation to family incomes and motoring is still an enjoyable pastime with many families owning three vehicles or more.
In South Africa the situation is very different. Except in two or three of the larger cities we have no reliable public transport and what we have is both expensive and sometimes unsafe and unreliable.
Not surprisingly then a family’s first purchase, as soon as they can afford it, is a car.
Most middle- class families would like two cars for the sake of convenience, but the fact that our rand has lost 50% of its value over the last five years has made this a pipe dream for many middle class South Africans.
Sadly the story of our county’s economic woes continues with factors like a crippling drought driving up food prices. The problems in the economy have been complicated by rising interest rates and there are those economists who predict an overall rise of around 1,5% this year. There are also the “running costs” of living in cities, which continually rise, like service and utility charges, while the cost of education at all levels is crippling, especially for the poor.
The only apparent light at the end of the tunnel is the oil price, which has dropped by 60% since 2004 to around $ 30 a barrel and is likely to stay there for some while, but this is offset by the weak rand.
Recently we saw a round of price increases on new cars, ranging from 10 to 15%. Some manufacturers, like Hyundai, have tried to sweeten the deal with long warranties, while others have allowed extended payment plans.
The point is however that whatever the special offer, you will have to pay for the car and the monthly repayment is less than half the cost of vehicle ownership.
Many people put their faith in the used car market and motor vehicle auctions, while yet others look to leasing. The problem with all of these options is that the more the car you choose costs new, the more it will cost you whether it is new or used, owned or leased. One would expect that cars made in the RSA would be able to avoid major price increases, unfortunately these vehicles are much dependent on imported parts, although some manufacturers like Volkswagen, run a used spares service for clients, where good quality used spares are made available.
Everyone in the motor trade to whom I have spoken in recent weeks, has indicated that there are likely to be more price increases this year and no one is willing to predict what those will be.
If the rand does decline further they can potentially be very large indeed. So our advice to you is, if you are planning to buy a car, the sooner the better.