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Price turnaround for SA used-car market?

2014-10-01 13:38

A BOON FOR USED CAR SALES: The latest TransUnion Vehicle Pricing Index shows that demand for new and used cars will continue to be 'muted' as consumers continue to face high interest rates. image: DAVE FALL

JOHANNESBURG, South Africa - The latest TransUnion Vehicle Pricing Index (VPI) contains a number of small, but significant, indications that the tide may be turning at last - perhaps not for buyers but certainly for the beleaguered South African used-car industry.

Used-car inflation has increased on a year-on-year basis for the third successive quarter, rising by 1.58% between Q3 2013 and Q3 2014. From 2012 to 2013, the used market experienced five straight quarters of year-on-year price deflation.

However, used-car inflation paled against the rise in new car prices which outpaced the CPI for the fourth consecutive quarter. At 7.82% in Q3, the year-on-year increase in new car inflation reached levels last seen at the height of the financial crisis in 2009.

NOT OUT OF THE WOODS YET

Keith Dye, CEO of TransUnion Auto Information Solutions, nevertheless warned that a slight slowing in the new-car price inflationary trend in August and September 2014 could indicate that the used-car industry may not be out of the woods yet.

“The rate of increase in new-car price inflation slowed in the previous two months, after reaching a high of 7.97% in July after rising consistently for 13 months,” Dye said. “If new-car price inflation continues to slow, the current swing back in favour of used cars could slow or reverse.”

According to TransUnion’s records of financial registrations, the trend towards the purchasing of used rather than new vehicles, which emerged in the first quarter of 2014, continued into Q3. The ratio of used-to-new touched a solid 1.80-to-1 in the current quarter, up from 1.67 in Q2; 1.53 in Q1 and 1.25 at the end of 2013.

Dye added: “With pressure on consumers continuing unabated in the face of rising interest rates and hefty increases in water and electricity tariffs, demand for both new and used vehicles is likely to remain muted for the foreseeable future."

TransUnion publishes its VPI quarterly.

The vehicle risk intelligence company calculates the VPI from data it receives in sales returns from thousands of dealers throughout South Africa, as well as vehicle financing registrations from all of the major banks and vehicle finance houses.


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