The pricing patterns in South Africa’s automotive market have shifted dramatically

In the third quarter of 2021, South Africa’s local car market saw a significant shift in pricing trends, with the new vehicle price index—which effectively measures the inflation rate for new vehicles—halving from the same period in 2020, while the used vehicle index more than doubling in the face of changing consumer demand and supply issues.

The latest TransUnion SA Vehicle Pricing Index (VPI) for new cars fell from 7.6 percent in the third quarter of 2020 to 3.8 percent in the third quarter of 2021, while the used vehicle index increased from 2.3 percent last year to 5.9 percent. The VPI calculates the association between the growth in vehicle price for new and used cars from a basket of 15 leading volume manufacturers.

The index is built using data from car sales across the industry.

Overall, the business is still recovering slowly from the consequences of the Covid-19 epidemic and the social turmoil that occurred earlier in 2021. Total financial agreement volumes in the passenger sector climbed by 5% year on year, with new passenger financing transactions increasing by 8% and used passenger car deals increasing by 11%.

According to Kriben Reddy, vice president of car information solutions for TransUnion Africa, the substantial adjustments in price trends are excellent news for weary customers. New automobiles are not only less expensive, but buyers will also benefit from a variety of incentives now being given by manufacturers in an attempt to stimulate the market.

With an increasing lack of used vehicle stock in the country, those wishing to trade in their old automobiles will find dealers prepared to pay top price for quality vehicles.

Even though used car costs will be higher than a year ago, buyers will likely acquire a higher quality vehicle for their money, as many consumers continue to trade down and/or reduce the number of vehicles in their households.

“There’s no doubt that the real storey for the quarter is the significant shift in pricing patterns over the last year, which is being driven by a combination of changing consumer demand and supply issues in the new car market, where the global computer chip shortage continues to affect motor manufacturers.” We import over 70% of our automobiles as a country 1, so we’re obviously experiencing the consequences of the scarcity – and there’s no end in sight

The used-to-new ratio climbed from 2.35 in 2020 to 2.4 in 2021, implying that 2.4 used vehicles are sold for every new vehicle sold. In the used car market, 35% of vehicles are less than two years old, and this figure is expected to fall as the supply of excellent used automobiles continues to dwindle.

Demo models financed accounted for 6% of used financed purchases in the quarter, indicating that buyers are choosing for older vehicles as quality availability shrinks and discretionary money becomes more constrained.

The percentage of automobiles (both new and used) financed for less than R200,000, R200,000-R300,000, and more than R300,000 experienced reduced volumes in the lower bracket and increased activity in the higher bracket.

This is owing to continued price rises that have driven many new automobiles beyond the R300,000 mark. There is also an increasing trend of buyers choosing for one somewhat more costly vehicle instead of two cars, for example, swapping two sedans for one SUV.

This is projected to continue in the coming months as real-world automobile costs rise.