Executive Summary
The TransUnion SA Vehicle Pricing Index (VPI) measures year-on-year price increases for new and used vehicles from a basket of passenger vehicles of the 15 top manufacturers by volume. The index is created from vehicle sales data collated from across the industry.
The VPI for new and used vehicles has increased, with new vehicle prices expected to rise based on previous patterns seen between Q1 2011 and Q2 2013. Compared to Q3 2019, new vehicle VPI rose to 7.6% from 3.3% and used vehicle pricing rose to 2.3% from 1.1%.
Macro-economic conditions have been difficult as South Africa’s GDP dropped by 51% in Q2 2020. While consumer spending dropped drastically with less affordability for big purchases, consumer and business confidence increased after record lows over the previous quarter — a positive signal for the industry.
Total financial agreement volumes in the passenger market have decreased substantially by 21% YoY from Q3 2019. New and used passenger finance deals have also decreased YoY by 23% and 20% respectively. This decline can be attributed to difficult trading conditions and uncertainty in the market.
Used car prices are expected to increase as demand grows and the supply of quality used vehicles diminishes, amid positive signs of a rise in new and used financed vehicles between July and September 2020 (at 45% and 35% respectively).
The used-to-new ratio has increased slightly to 2.35 in Q3 2020 vs. 2.31 in Q3 2019. In the used vehicle market, 36% of used cars sold are under two years old — an
ongoing trend for Q3 2020. Demo models made up 6% of used financed deals, suggesting consumers are opting for older vehicles as pressure on disposable income
increases.
According to the National Association of Automobile Manufacturers of South Africa (NAAMSA), there’s been a YoY decline of 33% in new passenger vehicles sales in Q3 2020 (vs. Q3 2019).
There’s more movement in new and used car financing in the following price brackets: below R200K, between R200K and R300k, and over R300K. Over the past quarter, financing of vehicles over R300K is the highest it’s been since we started tracking in 2011.
Despite lower overall volumes, we expect this positive trend to continue into the next quarter. This is also indicative that consumers’ disposable income is under strain which causes them to forgo or delay purchases.
Consumer affordability is expected to rise as the repo rate dropped to an all-time low of 3.5%, leaving lenders exposed to high delinquency rates. To minimise this risk, they’ll need to manage key drivers and amend thresholds of loan to value ratios, loan terms and balloon payments. Both consumers and dealers should carefully consider
the vehicles they purchase or stock — as a result of defleeting and repossession of certain vehicle derivatives in the upcoming months.
Overall, the global automotive industry has had another challenging quarter as global lockdowns are lifted and we adapt to a ‘new normal.’ In South Africa, it’s been a quarter of gradual recovery in business and consumer confidence, new vehicle sales, finance applications and overall demand. As the industry continues to adjust to change, future opportunities will be found in effective maintenance of and communication with existing clients.
Also view:
Buying a Vehicle, Vehicle Finance and Road Safety
Buying a Quality Used Car and Safety on the Road
Vehicle Buying, Auctions and the Auction Facilitator
Buying and Selling a Vehicle – Informed decisions and the Vehicle Retailer