Demand remains positive; consumers structure finance agreements to manage instalments
1 August 2013: The South African automotive industry recorded excellent new vehicle sales in July, showing an overall 7.5% increase year on year. This growth was significantly boosted by the rental market, which showed growth of 24% compared to July 2012. Passenger cars remained positive, with sales growth of 6.4% year on year, with Light Commercial Vehicles outperforming the market with growth of 9.2% year on year.
According to Cyril Zhungu, General Manager: Motor Division at WesBank, South Africa’s leading moveable asset-based financial solutions provider, consumer demand remains very positive. “This is backed by WesBank’s book data. July 2013 recorded the second highest month with 116 500 applications received. This represents year on year growth of 9%, compared to July 2012.”
However, comments Zhungu, contract periods have increased slightly from 68 to 69 months on both new and used cars. “In addition, we have also observed an increase in the demand for balloon payments, which has increased by 19% from January 2013 to July 2013. This indicates that consumers are using the structure of the finance agreement in order to maintain the affordability of the monthly repayments.
“In addition, we observed the average transaction value on new cars continuing to increase, recording an 11% rise over the past year. This is in line with the Transunion Auto CPI Index, which indicates that new car prices have increased in line with the Rand depreciation against the dollar, which has influenced the adjustment on new car prices. The price inflation on used cars is negative, which is expected to support demand for used cars”.
The price gap between new and used cars is resulting in the Used:New ratio moving in favour of used vehicles, showing a figure of 1.23:1 in July.
But, says Zhungu, the increase in the ratio is being offset by aggressive marketing activity by manufacturers, who are providing very attractive offers on new cars, which includes trade-in assistance, cash back offers and discounts.
Zhungu concludes, “WesBank foresees the market remaining positive for the remainder of this year, with a slight increase in activity in the used car market. We believe that the biggest factor in the foreseeable future will be the effect of a depreciating Rand and the ability of the manufacturers to maintain marketing activity in order to support vehicle sales.”
About WesBank:
With over 40 years of experience WesBank has become the leader in asset-based finance solutions in South Africa. The company is focused on providing quality asset finance and fleet management solutions for a number of market sectors. WesBank’s asset finance portfolio includes Aviation, Agriculture, Commercial and Company Vehicles, Plant and Office Equipment, Public Sector and Franchise finance solutions. Visit www.wesbank.co.za for more information.