What to expect from car prices in South Africa over the next few months
Published by TransUnion, VPI uses monthly vehicle risk information and sales data from thousands of dealers nationwide and loan registrations from all major banks and vehicle finance institutions.
Despite an acceleration in new car prices in Q3 2022, growth is still below the Consumer Price Index (CPI), which rose to 7.6% in October. Economists have blamed the rand’s sharp depreciation in 2022. Soaring new car prices.
Additionally, new data from the South African Association of Automobile Manufacturers (Naamsa) shows new car sales increased by 18.2% year-on-year, marking the 11th straight month of year-on-year growth.
However, Naamsa and car retailer Combined Motor Holdings (CMH) expect new car sales to come under pressure as prices rise and inflation remains high as interest rates rise.
“The growth outlook for outstandings this year remains constrained by rising interest rates and the associated higher debt service costs weighing on disposable incomes. We can see growth,” said Naamsa.
CMH has gone further and said it is hopeful. New car prices could rise by up to 10% in the next four months.
Consumers under pressure
Seven straight interest rate hikes since November 2021, high inflation and rising fuel prices have left consumers feeling the pinch as they battle their current cost of living.
South African households are increasingly turning to credit lines to cope with the country’s growing cost of living crisis, according to Nedbank economists.
“Private sector credit growth accelerated further to 9.7% year-on-year, the highest since December 2015, beating Nedbank and market forecasts of 8% and 8.2% respectively,” the bank said. rice field.
Nedbank added that other loans, including unsecured credit, remained strong at 15.6% year-on-year.
In addition, Kriben Reddy, Vice President of Automotive Information Solutions at TransUnion, said the latest Consumer Pulse survey found that more than half of South African consumers are cutting back on their spending, and will cut more discretionary spending in the coming months. He said it was clear what he expected.
Used car market under pressure
As a result of the economic pressures faced by consumers, drivers are holding onto their cars longer and used car prices are rising as quality inventories dwindle.
Used car prices rose from 5.9% in Q3 2021 to 9% year-on-year in Q3 2022, according to VPI. The index shows that the ratio of used to new cars sold is currently 2.1, with financial institutions financing 2.1 used cars for every new car.
Numerically, TransUnion funded 81,045 used vehicles in Q3 2022, compared to 39,589 new vehicles during the same period.
“In the used car market, 25% of cars sold in 2022 will be less than two years old, and this continues to decline as the supply of quality used cars continues to be under pressure,” said Reddy. says.
Reddy believes that rising used car prices are making buying a new car more attractive to car buyers.
Read: Buying a used car: How not to buy a stolen car in South Africa