Growing demand for used cars slows new vehicle sales

The new vehicle industry’s sales performance continued on its downward trajectory in August, according to the latest data from the National Association of Automobile Manufacturers of South Africa. Industry achieved sales of 46 146 vehicles last month, a yearon-year decline of 9.5%. Passenger sales remained weak, with a 13.1% decline, while light commercial vehicle (LCV) sales remained resilient with sales down only 1%.

The majority of consumers purchase cars through dealers. The passenger and LCV sales fell 18.1% and 5.5% respectively. Sales through rental grew slightly, year-on-year, at 0.8% – in line with rental companies renewing fleets.

Sales have fallen 10.5%, in line with WesBank’s 2016 forecast, which anticipates the market to be 12% down from last year.

WesBank’s data also indicates that August’s weak new vehicle sales were driven by this year’s trend: customers shifting to the used market. A total of 133 094 vehicle finance applications were received last month – year-on year growth of 3.7% – and the highest number of applications received for any month so far. But there was an 11.1% decline in applications for new cars, due to the shift to the used car market. Demand for used vehicle finance grew 11.2%, resulting in the used-to-new vehicle ratio growing to 1.67:1.

Buyers financing new vehicles are spending more than before, with the price of a new vehicle financed in August at R297 000 – an increase of 13.4%. Demand in the used market drove up prices of pre-owned cars by 9.2% during the same period.