Sales statistics for August reflect a continuing recovery in South Africa’s new vehicle market. Aggregated sales data from the National Association of Automobile Manufacturers of South Africa (Naamsa) show year-on-year growth of 6.7% for the past month, with total sales of 49 222 new vehicles.
This growth was mainly driven by consumer buying patterns. Passenger car sales through the dealer channel grew 11.2%, while light commercial vehicle (LCV) sales through dealers were up 6.7%, year-on-year. With three consecutive months of growth, the new vehicle industry’s year-to-date sales are up 0.6%.
“This growth is extremely positive. The shift back to new was expected and inevitable, especially with a dwindling supply of quality used vehicles,” said Rudolf Mahoney, Head of Brand and Communications, WesBank. “Meanwhile, new vehicle price inflation is slowing down. It is evident that manufacturers and dealers have come to realise that right now it’s a value-for-money play, and are offering highly attractive incentives to attract customers into the new car market.”
WesBank’s data mirrors this positive performance for August. Over the past month’s 22 working days, finance application volumes reached the highest level for this year. Demand for new vehicle finance, as measured by the volume of applications received, grew 9.74%. This marked a trend of four consecutive months of growth, averaging 7.4%. Conversely, used vehicle application volumes saw a third consecutive monthly decline in August. Application volumes fell 2.28%, year-on-year. Year-to-date, used vehicle finance application volumes are down 0.5%.
Strong activity in the used market over the last 24 months has resulted in depleting stock levels of quality used cars, with demand driving up prices in this market. In August, the average value of a used vehicle deal was 8.4% higher than the same period in 2016. WesBank’s book data indicates that used car prices grew an average of 7.9% over the past three months.
In contrast, average transaction values for new cars show a trend of slowing down. The average new vehicle deal in August 2017 was just 1.64% higher than August 2016. Over the last three months, the value of an average new vehicle finance deal has grown just 2.6%.
“Interest rates are also lower, which has had a significant positive impact on consumer sentiment and willingness to apply for credit. Further rate cuts are anticipated for September and this will stimulate the market for the remainder of 2017,” said Mahoney. “Buyers should just be very cognisant of their deal structures and how a vehicle purchase today will affect their finances four or five years down the line. They should buy smart, choose the deal that’s right for them, and plan ahead to ensure their budgets can absorb any changes in monthly affordability.”