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'SA car prices extremely sensitive to currency instability' - TransUnion

2018-02-09 08:05

Image: Dave Fall

Johannesburg - TransUnion has released its Vehicle Price Index (VPI), revealing that the price of used cars have increased in South Africa.

Price increase for used cars

Between Q3 2016 and Q3 2017, prices for new vehicles increased at a slower rate than many would have anticipated, with the new vehicle VPI dropping from 9.9% to 3.1%, the lowest such percentage since 2013. In the same period, price increases on used cars increased from 2.8% to 3.6%, the highest level observed since 2012. 

The previous report (Q2 2017) revealed a slow-down in the VPI increase on new vehicles, and this quarter is no different, continuing the trend toward greater affordability in the new car market. 

Q&A with TransUnionKriben Reddy, Senior Director, head of auto information solutions

1. Wheels24: Many readers expressed concerns that local car prices are too expensive – what are your thoughts on SA’s auto industry?

Kriben Reddy: Although this is a perception that comes up often the reality of the SA market is as follows:

From Q4 2016 to Q4 2017 the pricing index for new vehicles went from 9.4% to 2.4%, which is significantly lower and also significantly lower than CPI which is at around 4.7%

Many brands in SA include a warranty/service and maintenance plan into the new list price whereas in other regions consumers have to purchase this separately. This brings down the cost of ownership in the first few years.

Around 80% of vehicles sold in SA are imported which means our pricing is extremely sensitive to currency instability or weakness.

There are a high number of marketing incentives being run by OEM’s and Brands in SA which also significantly helps to lower the purchase price of a new vehicle.  

2. Wheels24: What is the current state of the SA automotive industry (e.g. Minor growth in 2017)?

Reddy: New vehicle pricing is significantly down year on year and well below CPI Volumes in terms of sales of new vehicles have also increased for the first time in 2017 since 2013.

The market is starting to shift back towards new vehicles from used as can be seen from the used to new ratio (at the end of this article).

3. Wheels24: What can be done to improve vehicle sales?

Reddy: Better economic conditions and political stability drives increased consumer and business confidence which in turn drives sales. Lower interest rates , petrol price decreases all add to a consumer having more disposable income which increases a consumers affordability level and allows for entry into the vehicle buying cycle.

4. Wheels24: What is the future of vehicle sales in SA? (electric, hybrid, fewer cars, improved public transport etc.)

Reddy: The 20 year view will be that electric vehicles will become more mainstream and affordable. Countries like Britain have already announced that by 2040 they will now longer sell vehicles with a petrol or diesel engine – these rulings will affect other markets like SA and further drive electric vehicles adoption

5. Wheels24: What is TransUnion’s role in the automotive industry?

Reddy: TransUnion Auto plays a pivotal role in SA automotive industry as we are the sole supplier of used vehicle values to the industry and have been since 1960. These values are used by the dealer market, the finance industry as well as the insurance industry. We are also the sole suppliers of a complete history report on every vehicle in the country.

What do you think of used car prices in SA?  Email us 

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