Buying a car sensibly

Used beats new in TransUnion report

The South African car market saw record lows in the second quarter of 2020, as the effects of Covid-19 and lockdown continue to ripple. This is according to consumer credit report agency TransUnion, whose local arm released its latest quarterly Vehicle Pricing Index (VPI) recently.

According to research by the firm, total financial agreement volumes in the used and new passenger market declined 71% compared to the same period in 2019.

“With negative sentiment on the rise, the auto industry hasn’t been able to recoup sales lost in April and auto dealers are facing a difficult 2020 — as higher prices and growing financial strain take their toll on consumers,” the report said.

“The South African motor industry was closed during April, operated at minimal capacity in May, and only resumed full operation in June.”

A separate Financial Hardship study by TransUnion showed that consumers had expected to be over R7,000 short on their budgets every month. More are opting to purchase used vehicles, while increasing activity was noted in the sub-R200,000 price region.

We reached out to Kriben Reddy, head of auto information solutions at the company, for additional insight.

“This is a tough time for dealers, but there are some post-lockdown positives — with total cost of ownership declining and rising demand for aftermarket parts as vehicle sales slow down.”

Reddy was unable to forecast how long it would take before the new vehicle market achieves the levels of performance it saw before lockdown.

“This depends on how long it will take consumers to recover from the economic effects of the Covid-19-induced lockdown. The longer the constraints of Covid-19 continue, the greater the impact on the industry and the broader economy.”

He said that a buying-down trend would continue to prevail, adding that the low-end market was buoyant even before Covid-19.

“[These] vehicles offer great value to the consumer in terms of reliability and technology. For many consumers this is more than adequate and it is not necessary to look any higher up.

“With the current buying-down trends, consumers are looking at different ways to hold onto their hard-earned cash. Buying a lower-end vehicle means lower monthly instalments, less on maintenance and running costs and most likely more affordable insurance premiums.”