South Africa’s new vehicle sales showed its largest decline of the year in July. According to the latest sales figures reported by the National Association of Automobile Manufacturers of South Africa (Naamsa), total market sales declined 6.1% last month.
Of the 54 112 new vehicles that were sold in July, 36 506 were passenger cars – representing an 8.8%, year-on-year, decline for this segment. Light commercial vehicle (LCV) sales saw a marginal increase, with a total of 15 090 sales – a year-on-year increase of 0.7%.
“Major competition and very attractive marketing incentives from manufacturers have driven LCV sales all year,” said Simphiwe Nghona, Executive Head of WesBank’s Motor Division. “Even though sales in this segment look relatively flat, they’re quite positive given the overall market conditions.”
Consumer demand for vehicle finance remains strong, however with an all-time high in the volume of finance applications received by WesBank. A total of 138 485 applications were received in July. Finance applications for new vehicles grew 3.2%, year-on-year. Application volumes for used vehicles grew 8.6% for the same period, the result of consumers continuing to buy down or looking for better value in the used market.
The Reserve Bank’s recent interest rate hike of 25 basis points (0.25%) will also affect heavily indebted consumers, who will have to spend more of their disposable income on servicing debt. Household debt levels remain high and consumer credit profiles are deteriorating. New affordability rules under the National Credit Act have seen a decline in the number of approvals, as these consumers are unable to qualify for more credit.
WesBank also advises consumers to not plan their budgets around August’s drop in fuel prices. The petrol and diesel prices are influenced by a depreciating rand and international oil prices – both volatile factors that could see prices increase in the coming months. The relief from lower fuel prices will most likely be short-lived.
“Given the prevailing economic conditions, consumers who are currently in the market for a new car should consider the long-term impact on their budgets, and carefully structure their finance contracts,” said Nghona. “They should use large deposits to help lower the monthly instalment amounts, and consider a fixed interest rate to safeguard themselves against future interest rate hikes. Longer repayment terms could also assist with affordability, but buyers should be very cautious when considering balloon payments. Insurance and maintenance costs should also be included in mobility budgets.”
Alan Straton
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