Car prices on the rise in South Africa

The automotive industry in SA has a challenging year ahead, with the prices of new vehicles continuing to climb above the inflation rate. This comes after the automotive market has already been severely constrained by the COVID-19 pandemic.

According to the latest TransUnion SA Vehicle Pricing Index (VPI), vehicle prices rose above the inflation rate for the third successive quarter in Q4 2020, at a time when consumers are already financially constrained and many car dealers are battling to stay in business due to the pandemic.

The vehicle risk intelligence company calculates the VPI from data received on monthly sales returns from thousands of dealerships throughout the country as well as vehicle financing registrations from all major banks and finance companies.

“The positive indicators of lower petrol prices, interest rates and inflation are not enough to move consumers into new vehicle purchases at this stage, with consumer confidence low as a result of the Covid-19 pandemic and ongoing unemployment rate concerns, negative economic growth rates and pressure on disposable income all having an impact,” Kriben Reddy, vice president of auto information solutions for TransUnion Africa told BusinessTech.

Vehicle pricing increased from 2.9% in Q4 2019 to 9.6% in Q4 2020. Used vehicle pricing increased from 1.2% in Q4 2019 to 2.9% in Q4 2020. The average Vehicle Finance for a car has increased by 6.7% year-on-year to R315,160.

Lenders are financing 2.31 used vehicles for every one new vehicle. When looking at vehicle finance, the group said that more South Africans are paying above R300,000 for their vehicles. Under a third of people (32%) pay R200,000 or less for their vehicles. By comparison, 40% of finance deals are now over the R300,000 mark.

The total number of people entering finance deals has decreased due to customers paying so much for a car alone.

New and used passenger finance deals decreased by 14.8% and 6.2%, respectively, year-on-year.

Demo models financed made up 6% of used financed deals, indicating consumers are opting for older vehicles as pressure on disposable income increases.

According to the National Association of Automobile Manufacturers of South Africa (NAMSA), there’s been a YoY decline of 19.8% in new passenger vehicles from Q4 2019 to Q4 2020.

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