South African motorists are taking advantage of the lowest interest rates for 31 years, a market that offers more choice than ever before, and the affordability of models that is being bolstered by competitive discounts by dealers and manufacturers, says Standard Bank.
Participating in an industry debate on the present state and future of the motor industry, which is part of the annual ‘People’s Wheels Awards’, Keith Watson, Head of Sales for Vehicle and Asset Finance at Standard Bank South Africa, said that although sales of new vehicles had slipped slightly since the beginning of the calendar year, volumes had held up remarkably well.
“NAAMSA monthly figures reveal that during August, a total of 56 253 vehicles were sold. Examining these figures has revealed that the swing towards smaller, fuel efficient cars has continued.
“We have no doubt that this trend will continue into 2013 as motorists look at price, affordability and value for money before making their purchases. Given this scenario and the value being offered within this sector of the market, we can expect smaller vehicles to make a strong showing in this year’s ‘People’s Wheels Awards.’”
Mr Watson notes however that predictions about winners of the awards will have to be tempered by the tendency of many motorists to vote for brands or models that they don’t own themselves. “Many motorists, although happy with their car choice, will vote for what they think the most desirable vehicle is and what they would like to drive. It is therefore feasible that bigger, more prestigious models could make a strong showing at the awards.”
The announcement last week by the Reserve Bank that the repo rate would not rise has also helped sustain the market. Interest rates are at a historic low in the country.
“Purchasers are still buying cars, but using mechanisms such as fixed rate instalment agreements to fix their costs within their budget limits. There is a distinct move away from linking repayments to fluctuations with the prime rate, as many buyers still remember the difficulties they faced during a period of rapidly increasing rates a few years ago.
“National Credit Act requirements have also helped buyers. The main advantages this offers is the waiving of deposits for approved buyers, and the extension of repayment periods from 54 months to 72 months,” Mr Watson said.
The option of deferring some payments through the mechanisms of balloon and residual payments has also assisted buyers. “Many will be monitoring their indebtedness to financial institutions and the market value of their vehicles. As these values intersect, they will trade in their vehicles and roll any residual payments into new agreements,” Mr Watson said.
Overall, however, the fact that sales had shown a downward trend since January, would pose challenges to dealers and manufacturers, as buying decisions are held over until the New Year by motorists wishing to save money by buying 2012 models at a discount.
Mr Watson said that a major characteristic of the market this year is the wide choice available. “New models have been regularly introduced and the spread of manufacturers represented in South Africa has grown further. Dealers have responded to the competition by offering deals to reduce the motorist’s costs. These have ranged from ‘cash discounts’, which in many cases equalled large deposits, free accessories and even the option to ‘buy up’ by bringing models above a purchaser’s price range into reach.
“This trend will continue in 2013. The challenge will be squarely on manufacturers and dealers, together with the banks, to bring more imaginative offers to market,” he says.
The fight for sales could also see the battle between the prestigious marques of Europe and the USA and emerging super brands of Asia offering buyers more value than ever before.
“Where affordability is still a major concern, it is more likely that a motorist will be lured away from a prestigious brand to an emerging brand which offers comparable styling, appointments and a list of ‘extras’ as standard.”
Asked about the outlook for 2013 and beyond, Mr Watson said that motorists would continue to get unprecedented value for their money, even though prices would rise as they were driven by exchange rates, import duties and other factors.
“South Africans love their cars. Many realise that the buyer’s market which is prevailing at present can’t continue indefinitely. Buyers will therefore take advantage of the situation for as long as they can, reaping as much benefit as they can.”