Transaction Capital has set out a new target of trading about 15,000 second-hand cars every month over the next 18 months as the owner of the WeBuyCars looks to deepen its market share beyond its present 10% threshold.
WeBuyCars is aiming for a 15% share of the second-hand car market that trades about 1.2-million passenger cars every year.
The WeBuyCars brand is now the crown jewel in Transaction Capital’s portfolio, accounting for 43% of its profit in the year to end-September, as an ailing economy, high personal debt and the rising cost living take many out of the new car market.
“What we are seeing is that more and more people are opting to be first-time owners of cars as opposed to passengers. And if you are going to be a first-time owner of a vehicle, you are pretty much likely to buy a second-hand car,” CEO David Hurwitz said in an interview on Tuesday.
“The other thing that we see is that banks typically don’t like financing an older car because they are not able to place any value on the collateral of the car. They don’t see an older car as being able to provide security against the loan because they don’t know what the car is worth and if they have to repossess that car.”
For first-time car owners, the average retail price is about R200,000, with an average age of eight or nine years, the company said.
In the 2022 financial year, it exceeded its target of selling and buying 10,000 vehicles a month as it reached about 12,000 sales a month in the last quarter of its financial year.
In terms of prices, inflation in the local market for used vehicles at the end of the second quarter was 8.3% year on year and “now seems to be slowing or stabilising”.
Core earnings in WeBuyCars surged 41% to R762m year on year after the company opened more physical branches and leveraged its e-commerce platforms to boost sales. Transaction Capital is pushing its stake in WeBuyCars to just under 90% from 75% now.
Debt collector Nutun, previously Transaction Capital Risk Services, also contributed significantly to group profits. Its core earnings from continuing operations rose 36% to R434m.
But core earnings at its SA Taxi, the biggest lender to minibus taxis and traditionally its mainstay business, fell 26% to R369m.
“These macroeconomic headwinds continue to place pressure on minibus taxi operator profitability, causing finance and insurance instalment affordability constraints,” Transaction Capital said in a statement.
This was compounded by the KwaZulu-Natal floods in April that affected Toyota production capability there and constrained SA Taxi’s ability to grow its loan portfolio in the second half of its 2022 year.
Longer-than-expected recovery in collections, slower origination of new loans due to Toyota supply shortages and a higher cost of procuring parts worsened its credit loss ratio to 5.7% from 4.3%, well above its 3% to 4% target band.
The company hiked its dividend for the year to end-September by just more than a third year on year to 70c a share after declaring a final dividend of 37c.
Its share price shed 5% to R39.05 on the JSE in late trade, but was up 86% over the past three years, significantly outperforming the broader market.
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