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Used Cars offer better value

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New vehicle sales are proving resilient, after an uncertain first half of the year. According to the National Association of Automobile Manufacturers of South Africa (Naamsa), industry total sales declined by 1.4% year-on-year, with a total of 55 722 units sold.

Of that total, passenger sales accounted for 37 953 units – a 2.7% decline, year-on-year – while the Light Commercial Vehicle (LCV) segment moved 14 942 units, representing year-on-year growth of 2.1%. Dealer sales declined by 1.8%, year-on-year, with rental fleet sales up 3.6%, year-on-year, mitigating the effects of a shrinking market.

WesBank data shows applications for credit grew by 17.5%, year-on-year, with the lion’s share of demand seen in used-car finance applications, with 17.7% year-on-year growth. WesBank attributes the decline in demand for new vehicles to a number of factors, including substantial price increases for new vehicles, interest rate hikes, and buyers exhausting their affordability measures.

Compared to the same period last year the average deal value for new vehicles has grown by 7.9%, outpacing the country’s current inflation rate. Those buyers who do choose to purchase a new vehicle have to contend with higher interest rates – the most recent decision by the reserve bank saw a 25 basis points hike – and a shrinking number of options to reduce monthly repayments. The average contract period for new vehicles is 69.27 months, fast approaching the 72-month limit imposed by banks.

“New vehicle prices are putting pressure on buyers’ budgets, even after exercising options such as longer repayment terms,” says Rudolf Mahoney, head of research at WesBank.

WesBank anticipates that the market will continue to see a shift to used vehicles, where buyers find better value for money. The used-to-new ratio is currently at 1.43:1, a high last seen in January 2012 when the new vehicle industry was recovering from a down cycle in the economy.

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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.