Automotive umbrella body Naamsa has welcomed the latest 25 basis point reduction in the repo rate, saying it should help stimulate moribund vehicle sales.
On Wednesday the SA Reserve Bank’s monetary policy committee cut rates for the third consecutive time, with the prime interest rate now at 11%.
“Vehicle purchases remain highly sensitive to interest rate movements given the predominant use of vehicle financing in the SA market,” said Naamsa CEO Mikel Mabasa.
“The rate cut represents a critical intervention in supporting economic recovery, particularly in the automotive sector, which has been under sustained pressure.”
Mabasa said at the start of 2024 the domestic new vehicle market was just 0.9% below its pre-pandemic level of 536,612 units recorded in 2019. However, despite a seasonal uptick in the final quarter of 2024, vehicle sales declined to 515,853 for the year, 3% less than in 2023 and underscoring the need for supportive monetary policy measures.
“Lower borrowing costs will enhance vehicle affordability across all market segments, encouraging consumer purchases and facilitating fleet expansions for businesses,” he said.
“The [Bank’s] monetary policy stance signals the possibility of further rate cuts in the months ahead, should inflation remain contained. A continued downward trajectory in interest rates, complemented by easing inflation and stabilised fuel prices, could accelerate a much-needed recovery in new vehicle sales.
“Should the [Bank] continue with a measured approach to reducing interest rates in 2025, the domestic new vehicle market could see a single-digit percentage improvement compared with 2024 levels, marking the beginning of a much-needed turnaround for the industry.”
After the three interest rate cuts totalling 75 basis points since September, it means motorists buying a R100,000 car on a 60-month instalment sale with no deposit or balloon payment will pay R2,270 a month at the 11% rate, compared with R2,308 at 11.75% this time last year — a R38 saving. The saving on a R500,000 car is R189.
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