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We love our cars!

2007-08-14 09:04
Chris Moerdyk

When everybody has exhausted the topic of crime and has finished slagging off ACSA for the daily chaos at our airports, the topic of conversation at most middle-class dinner tables inevitably turns to the outrageous price of motor cars in South Africa.

But, when it comes to pointing fingers at who is to blame for motorists here having to pay a lot more to get behind the wheel of a new car than their counterparts in virtually any other country in the world, those accusing fingers very rarely point at the real culprits behind those high prices - ourselves, the ordinary Joe.

Two years ago, the emeritus economics professor at Queen's University in Canada, Frank Flatters, claimed that statistics clearly showed that South Africa was one of the most profitable motor car markets in the world. Logic suggests that the only possible reasons are huge profit margins or Government incentives.

In South Africa's case it is a combination of both.

But, the main reason for high car prices in this country is the intense love affair we South Africans have always had with the motor car. We love cars to death. We love them so much that we just have to have them. Not because public transport is so bad but because we believe quite firmly that our entire status in society depends absolutely and entirely on what sort of car we drive.

With the result that no matter how high the price, after we've finished with a bit of token whingeing, we head off to the nearest dealer and cough up whatever price they're asking just to get behind the wheel of what we believe is the ultimate status symbol.

And they know it

And local motor car manufacturers and importers are very much aware of this. They take no notice of media commentaries about the car industry ripping consumers off with high prices because for the past few years and decades before that they have sold everything they have had in their showrooms in spite of regularly hiking prices to what should be totally unacceptable levels.

Which, strangely enough, is not ripping anybody off but simply applying the fundamental and perfectly legal marketing strategy of increasing prices to the maximum the market will bear. That's also the reason why house prices have rocketed. It's called supply and demand.

And even when times are tough, just as they are becoming now, have you noticed that car prices never actually come down? Once again it's our fault. Because, while we complain bitterly about not getting any sort of reasonable discount when we buy a new car, we would complain even more bitterly if we felt short-changed when we came to trade that car in and its resale value had decreased substantially because of its original discounted price.

And the car manufacturers and importers realise this. So, they try not to discount but rather to offer low interest rates and added value incentives.

Then of course, there are some other elements that come into play in terms of making high car prices easier to swallow. And that is if you use your car for business and elect to lease it, almost half the cost of the car is effectively paid for by SARS.

In fact, these cars are effectively subsidised by the taxpayer. And given the number of cars that are bought this way - probably the vast majority - that leaves relatively few buyers who are actually paying the full price.

And then there are those who get generous car allowances as part of their employment packages for whom cars are less expensive at the end of it all; and how about the really lucky ones, those executives who as part of their packages get interest free loans from their companies?

Lucky breaks

In my years in the motor industry I found that this means that for the prices of some perks tax and insurance, a lot of people who could not afford to drive a mid-range Merc could end up driving Ferraris, Aston Martins and Porsches without having to shell out a cent of capital. And with inflation still relatively high in global terms, they can sell these after a year or so and at worst break even.

On top of all that we just love that feeling of security when we buy a new car today and get warranties and guarantees for anything up to ten years and how wonderful it is not to have to pay for any services or maintenance for five years or more? Of course, all of that is built into the price and those "free" services come at a pretty hefty price.

And we don't want basic cars anymore but insist on them being loaded with every possible accessory and gizmo we can lay our hands on. And those gizmos are also very expensive because they're also priced at what the market will bear. And for all of this stuff it seems that the market is still quite happy to bear the unbearable.

So, what it all boils down to is that the reason we pay so much for our cars is quite simply our own fault because we just keep on buying them as though there was no tomorrow.

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