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New Vehicle Sales predicted to decline further

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The Reserve Bank has hiked the interest by 25 basis points, bringing the effective repo rate to 6.25%. The prime lending rate will change to 9.75%.

The rate hike will affect buyers who have vehicle finance agreements structured around a linked interest rate. Interest on these loans will be recalculated, and account holders will be notified of the increase in their monthly instalment.

“Although this increase is small, with a minor effect on the monthly instalment, buyers should not downplay any hikes in the interest rate,” says Rudolf Mahoney, Head of Brand and Communication at WesBank. “Those with other debts – such as credit cards and home loans – will find themselves with less disposable income.”

The current average deal value for a new car is R258 000. If initially financed over 60 months using a linked interest rate of 10.5%, the interest rate will now change to 10.75%. This will result in a monthly instalment that is R32.15 higher, at R5659.08.

While this remains a minor increase for car buyers, as it did with July’s rate increase, the impact will be more significant for consumers who have home loans and other forms of debt. With South African household debt remaining at high levels consumers will be put under pressure as higher loan repayments eat into their disposable income. This will also have the knock-on effect of affecting their ability to obtain new credit.

“We expect this rate hike to curb inflation, and help reign in the depreciation of the rand, but for ordinary people the immediate impact will be on their wallets,” says Mahoney. “Additionally, new vehicle sales will continue to decline as consumers hold off on car purchases, or simply find that they cannot afford credit at this point in time.”

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Alan Straton

Chief Cook, Bottle Washer and Broom Mechanic at MyPE
Passionate about Port Elizabeth and definitely NOT packing for Perth. Alan's ethos is epitomised in the words of Nelson Mandela; "I have fought against white domination and I have fought against black domination. I have cherished the idea of a democratic and free society. If need be, it is an ideal for which I am prepared to die." See more articles by Alan.