New-vehicle price increases rose 6.7% in the second quarter of 2023 compared to 3.9% in the same quarter last year, according to TransUnion’s latest SA Vehicle Pricing Index (VPI).
Over the same period, used-car pricing moved from 8.3% to 9.8%. The VPI measures the relationship between the increase in vehicle pricing for new and used vehicles, and uses vehicle sales data collated from across the industry. A higher VPI indicates faster pricing increases and, therefore, lower relative affordability for the consumer.
Three-year-old used vehicles saw the biggest increase in the second quarter, with this segment costing an average of 17% more than the same period last year.
The sharp price hikes continue to drive consumers towards older used vehicles or holding onto their current cars for longer, says TransUnion.
The negative affect on sales can be seen with the volume of vehicles financed in the second quarter of 2023 dropping 6% year-on-year, says TransUnion Africa CEO Lee Naik.
“The combination of low growth rates, load-shedding, high interest rates and inflation, and decreasing disposable incomes had made consumers cautious about spending. Together with negative consumer and business sentiment, this created a challenging environment for the vehicle market,” he says.
In recent months, new-vehicle sales have posted a mixed picture, with a steep drop in passenger cars and a sharp increase in light commercials and bakkie sales. In July, the passenger-car market, at 27,839 units, registered a decline of 9.7% compared with July 2022, while bakkies sold 12,666 units for a 32.6% gain, according to motor industry body Naamsa.
“While the combination of rising vehicle prices and decreasing disposable income has affected sales volumes, we have seen increased demand for SUVs and LCVs [light commercial vehicles] in the consumer market. SUVs made up more than 30% of new and used financed vehicles in the quarter, which suggests that consumers are being more discerning in their purchases and seeking out value in a challenging market,” said Naik.
The shifts in new- and used-vehicle pricing, combined with changes in buying preferences, saw the average loan size increase from R370,000-R390,000 in the past year. The used-to-new ratio declined from 2.1-1.8, which suggests a lack of quality used-vehicle stock.
“High-quality used vehicles are in short supply, because of low new-vehicle sales in the previous couple of years. Together with the rising cost of vehicle ownership and consumers having no positive equity in their current vehicles, it is increasingly burdensome for consumers to upgrade their vehicles. Faced with limited options, they’re turning to older used vehicles that are more affordable, vehicle rental options, or staying out of the market completely. This trend is likely to continue in the near term,” said Naik.
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